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COPYRIGHT LAW REVISION
HEARINGS ^« "^'"''^
BEFORE THE
SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES,
AND THE ADMINISTRATION OF JUSTICE
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
NINETY-FOURTH CONGRESS
FIRST SESSION
ON
H.R. 2223
COPYRIGHT LAW REVISION
MAY 7, ,S, 14, 15; JUNE 3, 5, 11. 12 : JT'LY 10, 17. 23 ; SEPTEMBER 11,
18 ; OCTOBER 9, 30 ; NOVEMBER 6, 20 ; AND DECEMBER 4, 1975
Serial No. 36
''"*\a.^^^^'''^'''"'J^
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
57-786 O WASHINGTON : 1976
NORTHEASTERN UNIVERSITY SCHOOL of UW UBRARY
COMMITTEE ON THE JUDICIARY
PETER W. RODINO, JR.. New Jersey, Chairman
JACK BROOKS, Texas EDWARD HUTCHINSON, Michigan
ROBERT W. KASTENMEIER, Wisconsin ROBERT McCLORY, Illinois
DON EDWARDS, California TOM RAILSBACK, Illinois
WILLIAM L. HUNGATE, Missouri CHARLES E. WIGGINS, California
JOHN CONYERS, JR., Michigan HAMILTON FISH, Jr., New York
JOSHUA BILBERG, Pennsylvania M. CALDWELL BUTLER, Virginia
WALTER FLOWERS, Alabama WILLIAM S. COHEN, Maine
JAMES R. MANN, South Carolina CARLOS J. MOORHEAD, California
PAUL S. SARBANES, Maryland JOHN M. ASHBROOK, Ohio
JOHN F. SEIBERLING, Ohio HENRY J. HYDE, Illinois
GEORGE E. DANIELSON, California THOMAS N. KINDNESS, Ohio
ROBERT F. DRINAN, Massachusetts
BARBARA JORDAN, Texas
RAY THORNTON, Arkansas
RLIZABETH HOLTZMAN, New York
EDWARD MEZVINSKY, Iowa
HERMAN BADILLO, New York
ROMANO L. MAZZOLI, Kentucky
EDWARD W. PATTISON, New York
CHRISTOPHER J. DODD, Connecticut
WILLIAM J. HUGHES, New Jersey
MARTIN A. RUSSO, Illinois
Earl C. Dudley, Jr., General Counsel
Garner J. Cline, Staff Director
Herbert Fuchs, Counsel
William p. Shattuck, Counsel
Alan A. Parker, Counsel
James F. Falco, Counsel
Maurice A. Barboza, Counsel
Thomas W. Hutchison, Counsel
Arthur P. Endres, Jr., Counsel
Daniel L. Cohen, Counsel
Franklin G. Polk, Counsel
Thomas E. Mooney, Counsel
Alexander B. Cook, Counsel
Coonstantine J. GekaSj Consel
Alan F. Coffey, Jr., Counsel
Kenneth N. Klee, Counsel
Raymond V. Smietanka, Counsel
Subcommittee on Courts, Civil Liberties, and the Administration of Justice
ROBERT W. KASTENMEIER, Wisconsin, Chairman
GEORGE E. DANIELSON, California TOM RAILSBACK, Illinois
ROBERT F. DRINAN, Massachusetts CHARLES E. WIGGINS, California
HERMAN BADILLO, New York
EDWARD W. PATTISON, New York ^
Herbert FCchs, Counsel
Bruce A. Lehman^ Counsel
— Gail P. Higgins, Counsel
^^ Timothy A. Boggs, Professional Staff Member
* * Thomas E. Mooney, Associate Counsel
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CONTENTS
Hearings held on — ^ase
May 7, 1975 1
May 8, 1975 - 119
May 14, 1975 183
May 15, 1975 267
June 3, 1975 373
June 5, 1975 433
June 11, 1975 483
June 12, 1975 683
July 10, 1975 857
July 17, 1975 991
July 23, 1975 1297
September 11, 1975 1393
September 18, 1975 1663
October 9, 1975 1779
October 30, 1975 1807
November 6, 1975 1835
November 20, 1975 1865
December 4, 1975 1951
Text of — «a
H.R. 2223 3
H.R. 4965 87
H.R. 5345 80
S. 1361 857
Witnesses :
Abrams, George, Alphabets, Inc 1014
Prepared statement 1027
AleinikoflF, Eugene N., counsel to the Agency for Instructional Tele-
vision and Other Educational Television Agencies 859
Prepared statement 860
Allen, Nicholas E., counsel, Music Operators of America 421
Barco, George J., general counsel, Pennsylvania Cable Television
Association 656
Prepared statement 661
Baumgarten, Jon, Macmillan, Inc., and Harcourt Brace and
Jovanovich 978
Bender, Ivan R., on behalf of the Educational Media Producers
Council 978
Prepared statement
Bikel, Theodore, president. Actors Equity Association 1298
Prepared statement 1352
Biller, Joel W., Secretary for Commercial Affairs and Business
Activities, Department of State 119
Binns, J. Warren, Jr., administrator of Instructional Television &
Radio and Educational Products Dissemination 859
Prepared statement 882
Blake, Eubie, American Guild of Authors and Composers 1648
Bradley, Rex A., chairman, National Cable Television Association.. 483
Prepared statement 501
Bresnan, William J., president. Cable Television Division of Tele-
prompter Corp 667
Prepared statement 679
Brylawski, E. Fulton, chairman, Copyright Committee, Bar Associa-
tion of the District of Columbia 459
Prepared statement 460
(in)
rv
Witnesses — Continued Page
Cairns, Robert W., executive director, American Chemical Society 229
Prepared statement 231
Cameron, Prof. Rondo, author 467
Prepared statement 473
Chapin, Edward W., counsel. Broadcast Music, Inc 907
Ciancimino, Albert F., counsel, SESAC, Inc 398, 1738
Prepared statement 397, 1738
Cohen, Edwin G., executive director of the Agency Instructional
Television 859
Prepared statement 880
Cohen, John, member of the board of directors. National Association
of Recording Merchandisers, Inc 1571
Prepared statement 1571
Collins, Fred, Jr., president. Music Operators of America 410
Cooper, Edward, vice president. Motion Picture Association of
America 1731
Cooper, Robert, executive secretary. Community Antenna Television
Association 613
Prepared statement 624
Copland, Aaron, composer , 374
Prepared statement 377
Coppedge, John O., chairman. National Collegiate Athletic Associa-
tion, Cable Television Association, Cable Television Association
Subcommittee 820
Prepared statement 817
Cornils, Wayne, chairman. Small Market Radio Committee, National
Association of Broadcasters 1366
Cramer, Edward M., president. Broadcast Music, Inc 907
Davis, Louis F. (Chip), composer 396
Prepared statement 395
Dew, Walter, Advertising Typographers Association 1142
Prepared statement 1212
Ebenstein, Daniel, on behalf of Leonard Storch Enterprises, Inc 1142
Prepared statement 1144
Evans, Robert V., vice president and general counsel, CBS, Inc 684, 765
Prepared statement 683, 764
Farmer, Ernest R., president, Shawnee Press, Inc., Delaware Water
Gap, Pa 344
Prepared statement 342
Feist, Leonard, executive vice president. National Music Publishers
Association 1 579
Fitzpatrick, James, general counsel, Recording Industry Association
of America 1298, 1393
Ford, Frederick W., counsel. Ad Hoc Committee of Concerned Cable
Television Operators for a Fair Copyright Law 627
Prepared statement 636
Freitag, Bernard J., teacher. Council Rock High School, New Town,
Pa 276
Gastel, Joseph, copyright attorney 1014
Prepared statement 1019
Glover, John D., director, Cambridge Research Institute 1401
Prepared statement - 1402
Goldbloom, Irwin, Deputy Assistant Attorney General, Civil Division,
Department of Justice 127
Prepared statement 149
Golodner, Jack, executive secretary. Council of AFL-CIO Unions for
Professional Employees 1 298
Gortikov, Stanley, president. Recording Industry Association of
America, Inc 1298, 1393
Prepared statement 1304, 1394
Gramuglia, Thomas, Independent Record & Tape Association of
America 1 238
Prepared statement 1279
Hamlisch, Marvin, American Guild of Authors and Composers 1646
Witnesses — Continued
Hardy, Ashton R., General Counsel, Federal Communications Com- Page
mission 433
Prepared statement 444
Heilman, David, EC Tape Service 1238
Hightower, John, chairman, Advocates for the Arts 1298
Prepared statement 1339
Kitchens, Howard B., executive director, Association for Educational
Communications & Technology 288
Prepared statement 279
Hochberg, Philip R., on behalf of Don V. Ruck, vice president. Na-
tional Hockey League 810
Prepared statement 812
Hogan, Robert F., executive secretary. National Council of Teachers
of English 292
Prepared statement 290
Holmes, Lee, president, GuamCable TV Co 1717
Prepared statement 1719
Hoopes, Townsend, president. Association of American Publishers 237
Prepared statement 238, 1702
Howard, William K., president, Hollywood Film Council 700
Prepared statement 698
Kaminstein, Abraham L., former Register of Copyrights, Library of
Congress 91
Kapp, Michael, president, Warner Special Products 1570
Karp, Irwin, counsel for the Authors League of America, Inc 216
354, 907, 1704
Prepared statement 220, 348, 910, 1705, 1764
Keller, Thomas J., Acting General Counsel, Office of Telecommuni-
cations Policy, Executive Office of the President 447
Prepared statement 457
Kiser, David B., associate, Cambridge Research Institute 1401
Korman, Bernard, general counsel, American Society of Composers,
Authors & Publishers 374, 907
Krelstein, Harold, chairman. Radio Board of Directors, National
Association of Broadcasters 1366
Kuhn, Bowie, Commissioner of Baseball 794
Prepared statement 785
Latman, Alan, attorney. International Typographic Composition
Association 991
Prepared statement 1004
Leeds, Henry, counsel, Mergenthaler Corp 1014
Lieb, Charles H., counsel for the Association of American Publishers 225
Prepared statement 226
Linden, Bella L., representing educational publishers 313
Prepared statement 311
Lorenz, John G., Acting Librarian of Congress, Library of Congress 91
Low, Edmon, representative of six library associations 184
Prepared statement 199
Mawdsley, Russell, chairman, Legislative Committee, Music Operators
of America 421
Prepared statement 418
Meell, Efdward J., chairman. Educational Media Producers Council 330
Prepared statement 316
Merry, Donald D., president, Sicom Electronics Corp 474
Prepared statement 479
Meyer, Gerald, counsel. Motion Picture Association 759
MuUiken, Charles, International Typographic Association 11 42
Prepared statement 1212
Nathan, Robert R., economist and attorney, president, Robert R.
Nathan Associates 1580
Oliver, Sy, composer 390
Prepared statement 391
Parker, Michael, director, typographic development, Mergenthaler 391
Corp 1014
Prepared statement 1036
Patterson, Perry S., counsel, Rock-Ola Manufacturing Corp 411
Prepared statement 413
VI
Witnesses — Continued
Peer, Ralph, vice president, Peer-Southern Organization; director, T'age
National Music Publishers Association 1645
Quayle, Donald R., senior vice president for broadcasting. Corpora-
tion for Public Broadcasting 859
Prepared statement 863
Raskind, Leo J., representing the Association of American Law
Schools, the American Association of University Professors, and the
American Council on Education 272
Prepared statement 269
Ringer, Barbara, Register of Copyrights, Library of Congress 91,
1779, 1807, 1865, 1901
Prepared statement 95
Rockwell, Dr. Margaret, Washington Ear 1757
Sandler, Jack B., chairman, Government Relations Committee of
the Book Manufacturers Institute, Inc 1695
Prepared statement 1697
Sheppard, Dr. Walter, representing the Association of Public Radio
Stations 1757
Simon, Gerald A., managing director, Cambridge Research Institute- 1401
Simpson, Paul C, Nashville, Tenn 693
Prepared statement 690
Smith, Eric H., associate general counsel. Public Broadcasting
Service 859
Prepared statement 865
Steinbach, Sheldon E., staff counsel, American Council on Education. _ 268
Strackbein, 0. R., representing International Allied Printing Trades
Association 1663
Prepared statement 1666
Summers, John B., general counsel, National Association of Broad-
casters 777
Prepared statement 774
Tegtmeyer, Rene D., Assistant Commissioner for Patents, Depart-
ment of Commerce 163
Prepared statement 159
Valenti, Jack, president, Motion Picture Association of America, Inc.,
and the Association of Motion Picture & Television Producers, Inc- _ 704
Prepared statement 705, 761, 1731
Van Arkel, Gerard, general counsel. International Typographical
Union 1694
Prepared statement 1668
Wally, I. Alan, president. Record & Tape Association of America 1238
Prepared statement 1251
Wasilewski, Vincent T., president. National Association of Broad-
casters 1366
Prepared statement 1363
Wasserstrom, Alfred H., copyright attorney 1142
Prepared statement 1217
Wicks, David O., Jr., Becker Communications Associates 598
Prepared statement 607
Wolff, I. Sanford, the American Federation of Musicians (AFL-CIO),
and the American Federation of Television and Radio Artists
(AFL-CIO) 1298
Prepared statement 1298
Won Pat, Hon. Antonio Borja, a Representative in Congress from
the Territory of Guam 1717
Zimmerman, Thomas F., first vice president. National Religious
Broadcasters, Inc 1 743
Prepared statement 1745
Zurkowski, Paul G., president, Information Industry Association 340
Prepared statement 332
vn
Additional material —
Affidavits and letters concerning licensing of copyrighted products to Page
television stations and the sale of advertising time to advertisers 743
Allen, Joseph P., Assistant Administrator for Legislative Affairs,
National Aeronautics and Space Administration, letter dated
September 5, 1975, to Hon. Peter W. Rodino, Jr., chairman, House
Committee on the Judiciary 178
American Broadcasting Companies, Inc., prepared statement 827
American Business Press, Inc., prepared statement 252
American Guild of Authors and Composers and the National Music
PubHshers Association, joint statement 1586, 1641
American Society of Composers, Authors, and Publishers, prepared
statement 925, 947
Biemiller, Andrew, director. Legislative Department, AFL-CIO, letter
dated July 22, 1975, to Hon. Robert W. Kastenmeier 1335
Bresnan, William J., president. Cable Division, Teleprompter Corp.. 849
Broadcast Music, Inc., prepared statement 389, 962, 965
Burns, Aaron, president. International Typeface Corp., letter dated
July 28, 1975, to Hon. Robert W. Kastenmeier 1020
"Cable Television Under the 1972 Rules and the Impact of Alternative
Copyright Fee Proposals," by Bridger M. Mitchell 517
Cairns, Robert W., American Chemical Society, letter dated June 25,
1975, to Hon. Robert W. Kastenmeier 243
"Copyrightability of Typeface and Type Font Design," statement of
position, Castcraft Industries, Inc 1228
Coyle, Maurice J., M.D., Department of Radiology, Providence Hos-
pital, Anchorage, Alaska, letter dated July 9, 1975, to Hon. Peter W.
Rodino, Jr 215
Davis, Hal C, president, American Federation of Musicians, letter
dated July 8, 1975, to Hon. Robert W. Kastenmeier 1658
Ebenstein, Daniel, Amster and Rothstein, counselors at law, letter
dated July 18, 1975, to Hon. Robert W. Kastenmeier 1194
Evans, Robert V., vice president, CBS, letter dated July 3, 1975, to
Hon. Robert W. Kastenmeier, chairman. Subcommittee on Courts,
Civil Liberties, and the Administration of Justice 689
Feist, Leonard, National Music Pubhshers' Association, Inc., letter
dated October 3, 1975, to Hon. Robert W. Kastenmeier 1651
Finn, James B., Ph. D., senior vice president, research and develop-
ment, the C. V. Mosby Co., letter dated August 8, 1975, to Dr.
Ray Alan Woodriff 265
General license agreement, restaurants, taverns, nightclubs, and simi-
lar establishments 385
Harris, James A., president. National Education Association, pre-
pared statement 274
Hightower, John B., chairman. Advocate for the Arts/Association
Councils for the Arts, prepared statement 263
Ivy, Emma G., R.N., Wrangell General Hospital, Wrangell, Alaska,
letter dated July 22, 1975, to Hon. Don Young 215
Keaney, Kevin J., general counsel. Federal Librarians Association,
prepared statement 262
King, Frank Peewee, composer, prepared statement 394
Korman, Bernard, general counsel, American Society of Composers,
Authors, and Publishers, letter dated August 6, 1975, to Hon.
Robert W. Kastenmeier 383
Lindow, Lester W., executive director. Association of Maximum
Service Telecasters, prepared statement 845
Lorenz, John G., Acting Librarian of Congress, letter dated August
26, 1975, to Hon. Peter W. Rodino, Jr., chairman. House Com-
mittee on the Judiciary 174
McCloskey, Robert J., Assistant Secretary for Congressional Rela-
tions, Department of State, letter dated May 7, 1975, to Hon. Peter
W. Rodino, Jr., chairman. House Committee on the Judiciary 172
McKenna, Frank, executive director. Special Libraries Association,
prepared statement 209
Marke, Julius J., American Association of Law Libraries, prepared
statement 254
VIII
Additional material — iContinued
Marshall, Nancy H., director, Wisconsin Interlibrary Loan Service,
Madison, Wis., letter dated May 6, 1975, to Hon. Robert W. Page
Kastenmeier 215
Mathews, Hon. David, Secretarj', Department of Health, Education,
and Welfare, prepared statement 261
Mercer, Johnny, composer, prepared statement 381
Mergenthaler Linotype Co., prepared statement 1054
Nathan, Robert R., president, Robert R. Nathan Associates, Inc.,
letter dated October 24, 1975, to Hon. Robert W. Kastenmeier 1640
National Broadcasting Co., Inc., prepared statement 825, 1385
National Music Publishers Association and American Guild of Authors
& Composers, prepared statement 920
Nimmer, Prof. Melville B., professor of law, UCLA School of Law,
prepared statement 1038
Norwood, Frank W., executive secretary. Joint Council on Educational
Telecommunications, letter dated July 10, 1975, to Hon. Robert W.
Kastenmeier 883
Parker, Michael, director, Tj^pographical Development Mergenthaler
Linotype Co., letter dated July 28, 1975, to Hon. Robert W.
Kastenmeier 1041
Passano, William M., chairman of the board, Williams & Wilkins Co.,
prepared statement 260
Rayin, Mona (R.N.), instructor coordinator of R.N. Programs and
Outreach, letter dated August 12, 1975, to Hon. Don Young 214
"Registration of Original Typeface Designs: Extension of Comment
Period," vol.. No. 223, Federal Register, November 18, 1975 1017
"Registration of Original Typeface Designs," vol. 39, No. 176, Federal
Register, September 10, 1974 1016
Ringer, Barbara, Register of Copyrights, letter dated June 6, 1975, to
Hon. Robert W. Kastenmeier 1008
Ruck, Don V., vice president. National Hockey League, prepared
statement 813
Schrader, Dorothy M., General Counsel, Copyright Office, prepared
statement 1015
Stevens, Hon. Ted, a U.S. Senator From the State of Alaska, letter
dated October 8, 1975, to Hon. Robert W. Kastenmeier 1659
Steuermann, Clara, president. Music Library Association, prepared
statement 207
"The Great American Rip-Off," bj' Mike Terranova, a pamphlet
published by the Independent Record and Tape Association of
America 1265
Times Mirror, prepared statement 852
"Typeface Design Protection," statement of position of the American
Institute of Graphic Arts 1226
Valenti, Jack, president. Motion Picture Association of America, Inc.,
letters to Hon. Robert W. Kastenmeier —
September 10, 1975 1724
November 7, 1975 . 1736
Vanantwerpen, F. J., president. Council of Engineering and Scientific
Society Executives, prepared statement 369
Wally, Alan I., president, Record and Tape Association of America,
letter dated July 22, 1975, to Hon. Robert W. Kastenmeier 1263
Warren, Albert, chairman. Copyright Committee, Independent News-
letter Association, prepared statement 367
Wigron, Harold E., National Education Associations 276
Woodriff, Dr. Ray, Department of Chemistry, Montana State Univer-
sity, prepared statement 265
Young, Hon. Don, a Representative in Congress From the State of
Alaska, letter dated October 2, 1975, to Hon. Robert W.
Kastenmeier 214
Appendixes
Appendi?t 1. — Teleprompter Corp. memorandum on Constitutionality
of Proposed Copyright Legislation (H.R. 2223) 1917
Appendix 2. — 18 briefing papers submitted by the Copyright Office__ 2051
Appendix 3. — Report of Working Group of Conference on Resolution
of Copyright Issues (dealing with library photocopying) 2092
Appendix 4. — Miscellaneous communications 2124
COPYRIGHT LAW REVISION
WEDNESDAY, MAY 7, 1975
House of Representatives,
Subcommittee on Courts, Civil Liberties,
AND THE Administration of Justice
OF THE Committee on the Judiciary
Washingto?!, B.C.
The subcommittee met, pursuant to notice, at 10:10 a.m., in room
2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier
[chairman of the subcommittee] presiding.
Present : Representatives Kastemneier, Danielson, Drinan, Pattison,
Railsiback, and Wiggins.
Also present : Herbert Fuchs and Bruce A. Lehman, counsels ; and
Thomas E. Mooney, associate counsel.
Mr. Kastenmeier. The committee will come to order. We have met
this morning to begin subcommittee hearings on H.R. 2223, introduced
by the Chair, for the general revision of the copyright law.
Ten yeare ago this month in this room the subcommittee began what
turned out to be 22 days of public hearings on a bill having the same
purpose, namely, the total revision of title 17, United States Code, the
copyright law.
The 1965 hearings, followed by many subcommittee meetings, re-
sulted in a revision bill being reported to and passed by the House of
Representatives on April 11, 1967. The Senate, however, failed to act
on that bill and the House-passed bill expired.
In September 1974, when the Senate at last did pass a copyright law
revision bill, the involvement of the House Judiciaiy Committee in
the nomination of Nelson Rockefeller to be Vice President prevented
House consideration of the measure during what was left of 1974.
However, the Congress did enact legislation creating a National Com-
mission on New Technological Uses of Copyrighted Works, of which
the President is to appoint the members.
With the coining of 1975, Senator McClellan reintroduced the 1974
Senate-passed bill as S. 22, and the Chair introduced an identical bill
in the House under the number H.R. 2223. Title II of the bills S. 22 and
H.R. 2223, go beyond providing copyright law revision, and provide
protection of ornamental designs of useful articles.
In addition, the subcommittee has before it two measures directly
related to the proposed revision. One of these, H.R. 5345, introduced
by our subcommittee colleague, Mr. Danielson, would create a per-
former's royalty as part of the bundle of rights known as copyright.
The other, H.R. 4965, introduced by Mr. Won Pat, would authorize
the making of video tapes for transmission on noncontiguous cable
television systems, that is, in places other than the 48 mainland States.
(1)
H.R. 2223, H.R. 5345, and H.R. 4965 will be placed in the record
of the hearings at the conclusion of this statement.
Article I, section 8 of the Federal Constitution empowers Congress
"to promote the progress of science and useful arts, by securing to
authors * * * the exclusive right to their * * * writings * * *." At the
very least, therefore, Congress has the constitutional obligation to
determine whether and to what extent the progress of the useful arts
will be promoted by congressional grants of exclusivity for the writ-
ings of authors.
The purpose of the pending legislation is, in short, to bring up to
date the copyright law which has not been substantially revised since
1 909. It should be our commitment to correct this neglect, for the great
and growing acceleration of technology and the resultant new uses of
copyrighted works have rendered much of the existing law inade-
quate and obsolete.
The subcommittee is pleased, this morning, to open the hearings by
welcoming witnesses from the Library of Congress. We have the
Honorable John G. Lorenz, Acting Librarian of Congress; Abraham
L. Kaminstein, former Register of Copyrights who went through the
1965-67 hearings with us, and Barbara Ringer, also an old friend, the
present Register of Copyrights. Mr. Lorenz, will you begin ?
[H.R. 2223, H.R. 5345, and H.R. 4965 are as follows:]
94th CONGRESS f f ^% OOOO
1ST Session J^^ |^^ ZZZO
IN THE HOUSE OF REPRESENTATIVES
January 28,1975
Mr. Kastenmeier introduced the following bill ; which was referred to the Com-
mittee on the Judiciary
A BILL
For the general revision of the Copyright Law, title 17 of the United States
Code, and for other purposes.
1 Be it enacted hy the Seiiate and House of Representatives of the
2 United States of America in Congress assembled,
3 TITLE I— GENERAL REVISION OF COPYRIGHT LAW
4 Sec. 101. Title 17 of the United States Code, entitled "Copyrights",
5 is hereby amended in its entirety to read as follows :
6 TITLE 17— COPYRIGHTS
Chapter Sec.
1. Subject Matter and Scope of Copyright 101
2. CoPTRiGHT Ownership and Transfer 201
3. Duration of Copyright 301
4. Copyright Notice, Deposit, and Registration 401
5. Copyright Infringement and Remedies 501
6. Manufacturing Requirement and Importation 601
7. Copyright Office 701
8. Copyright Royalty Tribunal. 801
7 Chapter 1.— SUBJECT MATTER AND SCOPE OF COPYRIGHT
Sec.
101. Definitions.
102. Subject matter of copyright : In general.
103. Subject matters of copyright : Compilations and derivative works.
104. Subject matter of copyright : National origin.
105. Subject matter of copyright : United States Government works.
106. Exclusive rights in copyrighted works.
107. Limitations on exclusive rights : Fair use.
108. Limitations on exclusive rights : Reproduction by libraries and archives.
2
1 TITLE 17— COPYRIGHTS— Continued
2 Chapter 1.— SUBJECT MATTER AND SCOPE OF
3 COPYRIGHT— Continued
Sec.
109. Limitations on exclusive rights : Effect of transfer of particular copy or
phonorecord.
110. Limitations on exclusive rights : Exemption of certain performances and
displays.
111. Limitations on exclusive rights : Secondary transmissions.
112. Limitations on exclusive rights : Ephemeral recordings.
113. Scope of exclusive rights in pictorial, graphic, and sculptural works.
114. Scope of exclusive rights in sound recordings.
115. Scope of exclusive rights in nondramatic musical works : Compulsory license
for making and distributing phonorecords.
116. Scope of exclusive rights in nondramatic musical works : Public perform-
ances by means of coin-operated phonorecord players.
117. Scope of exclusive rights : Use in conjunction with computers and similar
information systems.
4 § 101. Definitions
5 As used in this title, the following terms and their variant forms
6 mean the following :
7 An "anonymous work" is a work on the copies or phonorecords
8 of which no natural person is identified as author.
9 "Audiovisual works" are works that consist of a series of related
10 images which are intrinsically intended to be shown by the use of
11 machines or devices such as projectors, viewers, or electronic
13 equipment, together with accompanying sounds, if any, regardless
13 of the nature of the material objects, such as films or tapes, in
14 which the works are embodied.
15 The "best edition" of a work is the edition, published in the
16 United States at any time before the date of deposit, that the Li-
17 brary of Congress determines to be most suitable for its purposes.
18 A person's "children" are his immediate offspring, whether
19 legitimate or not, and any children legally adopted by him.
20 A "collective work" is a work, such as a periodical issue, an-
21 thology, or encyclopedia, in which a number of contributions,
22 constituting separate and independent works in themselves, are
23 assembled into a collective whole.
24 A "compilation" is a work formed by the collection and assem-
25 bling of pre-existing materials or of data that are selected, coordi-
26 nated, or arranged in such a way that the resulting work as a
27 whole constitutes an original work of authorship. The term "com-
28 pilation" includes collective works.
29 "Copies" are material objects, other than phonorecords, in which
30 a work is fixed by any method now known or later developed, and
31 from which the work can be perceived, reproduced, or otherwise
1 communicated, either directly or with the aid of a machine or
2 device. The term "copies" includes the material object, other than
3 a phonorecord, in which the work is first fixed.
4 "Copyright owner," with respect to any one of the exclusive
5 rights comprised in a copyright, refers to the owner of that par-
6 ticular right.
7 A work is "created" when it is fixed in a copy or phonorecord
8 for the first time ; where a work is prepared over a period of time,
9 the portion of it that has been fixed at any particular time con-
10 stitutes the work as of that time, and where the work has been
11 prepared in diiferent versions, each version constitutes a separate
12 work.
13 A "derivative work" is a work based upon one or more pre-
14 existing works, such as a translation, musical arrangement, dram-
15 atization, fictionalization, motion picture version, sound record-
16 ing, art reproduction, abridgment, condensation, or any other
17 form in which a work may be recast, transformed, or adapted. A
18 work consisting of editorial revisions, annotations, elaborations,
19 or other modifications which, as a whole, represent an original
20 work of authorship, is a "derivative work."
21 A "device," machine," or "process" is one now known or later
22 developed.
2*^ To "display" a work means to show a copy of it, either directly
24 or by means of a film, slide, television image, or any other device
25 or process or, in the case of a motion picture or other audiovisual
26 work, to show individual images nonsequentially.
27 A work is "fixed" in a tangible medium of expression when its
28 embodiment in a copy or phonorecord, by or under the authority
29 of the author, is sufficiently permanent or stable to permit it to
30 be perceived, reproduced, or otherwise communicated for a period
31 of more than transitory duration. A work consisting of sounds.
32 images, or both, that are being transmitted, is "fixed" for pur-
33 poses of this title if a fixation of the work is being made simultane-
34 ously with its transmission.
35 The terms "including" and "such as" are illustrative and not
36 limitative.
37 A "joint work" is a work prepared by two or more authors
38 with the intention that their contributions be merged into insepa-
39 rable or interdependent parts of a unitary whole.
40 "Literary works" are works other than audiovisual works,
6
1 expressed in words, numbers, or other verbal or numerical sym-
2 bols or indicia, regardless of the nature of the material objects,
3 such as books, periodicals, manuscripts, phonorecords, or film, in
4 which they are embodied.
5 "^Motion pictures" are audiovisual works consisting of a sei-ies
6 pi related images which, when shown in succession, impart an
7 impression of motion, together with accompanying sounds, if any.
8 To "perform" a work means to recite, render, play, dance, or
9 act it, either directly or by means of any device or pix)cess or, in
10 the case of a motion picture or other audiovisual work, to show its
11 images in any sequence or to make the sounds apcqmpanying it
12 audible.
13 "Phonorecords" are material objects in which sounds other than
14 those accompanying a motion picture or otlier ai|diovisual woi-k,
15 are fixed by any method now known or later xieveloped, and from
16 which the sounds can be perceived, reproduced, or otherwise com-
17 municated, either directly or with the aid of a n^achine or device.
18 The term "phonorecords" includes the material object in which
19 the sounds are first fixed.
20 "Pictorial, graphic, and sculptural works" include two-dimen-
21 sional and three-dimensional works of fiixe, graphic, and applied
22 art, photographs, prints and art reproductions, maps, globes,
23 charts, plans, diagrams, and models.
24 A "pseudonymous work" is a work on the copies or plienor
25 records, of which the author is identified under a fictitious name.
26 "Publication" is the distribution of copies or phonorecords of a
27 work to the public by sale or other transfer of ownership, or by
28 rental, lease, or lending. The offering to distribute copies or
29 phonorecords to a group of persons for purposes of further disr
30 tribution, public performance, or public display, constitutes
31 publication. A public performance or display of a work does not
32 of itself constitute publication.
33 To perform or display a work "publicly" means i
( 1 ) to perform or display it at a place open to the public or
at any place where a substantial number of persons outside
of a normal circle of a family and its social acquaintances is
34
35
36
37 gathered ;
38
39
(2) to transmit or otherwise communicate a performance
or display of the work to a place specified by clause (1) or
*" to the public, by means of any device or process, whetlier the
1 members of the public capable of receiving the performance
2 or display receive it in the same place or in separate places
3 and at the same time or at different times.
4 "Sound recordings" are works that result from the fixation of
5 a series of musical, spoken, or other sounds, but not including the
6 sounds accompanying a motion picture or other audiovisual work,
7 regardless of the nature of the material objects, such as disks,
8 tapes, or other phonorecords, in which they are embodied.
9 "State" includes the District of Columbia and the Common-
10 wealth of Puerto Rico, and any territories to which this title is
11 made applicable by an act of Congress.
12 A "transfer of copyright ownership" is an assignment, mort-
13 gage, exclusive license, or any other conveyance, alienation, or
14 hypothecation of a copyright or of any of the exclusive rights
15 comprised in a copyright, whether or not it is limited in time or
16 place of effect, but not including a nonexclusive license.
17 A "transmission program" is a body of material that, as an
18 aggregate, has been produced for the sole purpose of transmission
19 to the public in sequence and as a xmit.
20 To "transmit" a performance or display is to communicate it
21 by any device or process whereby images or sounds are received
22 beyond the place from which they are sent.
23 The "United States," when used in a geographical sense, com-
24 prises the several States, the District of Columbia and the Com-
25 monwealth of Puerto Rico, and the organized territories under
26 the jurisdiction of the United States Government.
27 A "useful article" is an article having an intrinsic utilitarian
28 function that is not merely to portray the appearance of the
29 article or to convey information. An article that is normally a part
30 of a useful article is considered a "useful article."
31 The author's "widow" or "widower" is the author's surviving
32 spouse under the law of his domicile at the time of his death,
33 whether or not the spouse has later remarried.
34 A "work of the United States Government" is a work prepared
35 by an officer or employee of the United States Government as part
36 of his official duties.
37 A "work made for hire" is :
38 (1) a work prepared by an employee within the scope of
39 his employment ; or
•8
1 (2) a work specially ordered or commissioned for use as
2 a contribution to a collective work, as a part of a motion pic-
3 ture or other audiovisual work, as a translation, as a supple-
4: mentary work, as a compilation, as an instructional text, as
5 a test, as answer material for a test, as a photographic or
6 other portrait of one or more persons, or as an atlas, if the
7 parties expressly agree in a written instrument signed by
8 them that the work shall be considered a work made for hire.
^ A "supplementary work" is a work prepared for publication
10 as a secondary adjunct to a work by another author for the
^^ purpose of introducing, concluding, illustrating, explaining,
12 revising, commenting upon, or assisting in the use of the other
13 work, such as forewords, afterwords, pictorial illustrations,
1^ maps, charts, tables, editorial notes, musical arrangements,
1^ answer material for tests, bibliographies, appendixes, and
1^ indexes. An "instructional text'* is a literary, pictorial, or
1' graphic work prepared for publication with the purpose of
1° use in systematic instructional activities.
§ 102. Subject matter of copyright: In general
(a) Copyright protection subsists, in accordance with this title, in
"1 original works of authorship fixed in any tangible medium of expres-
"2 sion, now known or later developed, from which they can be perceived,
"3 reproduced, or otherwise communicated, either directly or with the aid
2* of a machine or device. Works of authorship include the following
"^ categories :
2" ( 1 ) literary works ;
^' (2) musical works, including any accompanying words ;
^^ (3) dramatic works, including any accompanying music;
^^ (4) pantomimes and choreographic works;
^" ( 5 ) pictorial, graphic, and sculptural works ;
^1 ( 6 ) motion pictures and other audiovisual works ;
^^ (7) sound recordings.
(b) In no case does copyright protection for an original work of
autliorship extend to any idea, plan, procedure, process, system, method
of operation, concept, principle, or discovery, regardless of the form
in which it is described, explained, illustrated, or embodied in such
work.
19
20
33
34
35
36
37
^° §103. Subject matter of copyright: Compilations and derivative
3" works
(a) The subject matter of copyright as specified by section 102 in-
40
9
1 eludes compilations and derivative works, but protection for a work
2 employing pre-existing material in which copyright subsists does not
3 extend to any part of the work in which such material has been used
4 unlawfully.
5 (b) The copyright in a compilation or derivative work extends only
6 to the material contributed by the author of such work, as dis-
7 tinguished from the pre-existing material employed in the work,
8 and does not imply any exclusive right in the pre-existing material.
9 The copyright in such work is independent of, and does not aifect
10 or enlarge the scope, duration, ownership, or subsistence of, any copy-
11 right protection in the pre-existing material.
12 § 104. Subject matter of copyright : National origin
13 (a) Unpublished Works. — The works specified by sections 102 and
14 103, while unpublished, are subject to protection under this title with-
15 out regard to the nationality or domicile of the author.
16 (b) PtJBLisHED Works. — The works specified by sections 102 and
17 103, when published, are subject to protection under this title if —
18 (1) on the date of first publication, one or more of the authors
19 is a national or domiciliary of the United States, or is a national,
20 domiciliary, or sovereign authority of a foreign nation that is a
21 party to a copyright treaty to which the United States is also a
22 party ; or
23 (2) the work is first published in the United States or in a for-
24 eign nation that, on the date of first publication, is a party to the
25 Universal Copyright Convention of 1952 ; or
26 (3) the work is first published by the United Nations or any
27 of its specialized agencies, or by the Organization of American
28 States ; or
(4) the work comes within the scope of a Presidential procla-
mation. Whenever the President finds that a particular foreign
31 nation extends, to works by authors who are nationals or domicili-
32 aries of the United States or to works that are first published in
33 the United States, copyright protection on substantially the same
34 basis as that on Avhich the foreign nation extends protection to
35 works of its own nationals and domiciliaries and works first pub-
lished in that nation, he may by proclamation exlend protection
3' under this title to works of which one or more of the authors is,
on the date of first publication, a national, domiciliary, or sov-
ereign authority of that nation, or which was first published in
that nation. The President may revise, suspend, or revoke any
29
30
40
41
42
10
8
1 such proclamation or impose any conditions or limitations on
2 protection under a proclamation.
3 (c) The expropriation, by a <iovernmental organization of a for-
4 eijrn country, of a copyripfht, or the ri<rht to secure a copyrifrht, or
5 any rigfht comprised in a copyright, or any right in a work for which
6 copyright may be secured, or the transfer of a copyright or of any such
7 right, or the power to authorize any use of the work thereunder, from
8 the author or copyright owner to a governmental agency of a foreign
9 country pursuant to any law, decree, regulation, order or other action
10 of the government effecting or requiring such transfer, shall not be
11 given effect for the purposes of this title.
12 §105. Subject matter of copyright: United States Government
13 works
14 Copyright protection under this title is not available for any work
15 of the United States Government, but the United States Government
16 is not precluded from receiving and holding copyrights transferred
17 to it by assignment, bequest, or otherwise.
18 § 106. Exclusive rights in copyrighted works
19 Subject to sections 107 through 117, the owner of copyriglit under
20 this title has the exclusive rights to do and to authorize any of the
21 following :
22 (1) to reproduce the copyrighted work in copies or phono-
23 records ;
24 (2) to prepare derivative works based upon the copyrighted
25 work ;
26 (3) to distribute copies or phonorccords of the copyrighted
27 work to the public by sale or other transfer of ownersliip, or by
28 rental, lease, or lending;
29 (4) inthecaseof literary, musical, dramatic, and choreographic
30 works, pantomimes, juotion pictures and other audiovisual works.
31 to perform the copyrighted work publicly ;
32 (5) in the case of literary, musical, dramatic and choreographic
33 works, pantomimes, and pictorial, graphic, or sculptural works,
34 including the individual images of a motion picture or other
35 audiovisual work, to display the copyrighted work publicly.
36 § 107. Limitations on exclusive rights: Fair use
37 Notwithstanding the provisions of section 106, the fair use of a
38 copyrighted work, including such use by reproduction in copies or
39 phonorecords or by any other means specified by that section, for pur-
40 poses such as criticism, comment, news reporting, teaching, scholar-
11
1 ship, or research, is not an infringement of copyright. In determining
2 whether the use made of a work in any particular case is a fair use
3 the factors to be considered shall include :
4 ( 1 ) the purpose and character of the use ;
5 (2) the nature of the copyrighted work ;
6 (3) the amount and substantiality of the portion used in re-
7 lation to the copyrighted work as a whole ; and
8 (4) the effect of the use upon the potential market for or value
9 of the copyrighted work.
10 §108. Limitations on exclusive rights: Reproduction by libraries
11 and archives
12 (a) Notwithstanding the provisions of section 106, it is not an in-
13 fringement of copyright for a library or archives, or any of its em-
14 ployees acting within the scope of their employment, to reproduce no
15 more than one copy or phonorecord of a work, or distribute such copy
16 or phonorecord, under the conditions specified by this section, if :
17 (1) The reproduction or distribution is made without any pur-
18 pose of direct or indirect commercial advantage;
19 (2) The collections of the library or archives are (i) open to the
20 public, or (ii) available not only to researchers affiliated with the
21 library or archives or with the institution of which it is a part, but
22 also to other persons doing research in a specialized field ; and
23 (3) The reproduction or distribution of the work includes a
24 notice of copyright.
25 (b) The rights of reproduction and distribution under this section
26 apply to a copy or phonorecord of an unpublished work duplicated in
27 facsimile form solely for purposes of preservation and security or for
28 deposit for research use in another library' or achives of the type de-
29 scibed by clause (2) of subsection (a), if the copy or phonorecord
30 reproduced is currently in the collections of the library or archives.
31 (c) The right of reproduction under this section applies to a copy
32 or phonorecord of a published work duplicated in facsimile form solely
33 for the purpose of replacement of a copy or phonorecord that is dam-
34 aged, deteriorating, lost, or stolen, if the library or archives has, after
35 a reasonable effort, determined that an unused replacement cannot be
36 obtained at a fair price.
37 (d) The rights of reproduction and distribution under this section
38 apply to a copy, made from the collection of a library or archives
39 where the user makes his request or from that of another libraiy or
40 archives, of no more than one article or other contribution to a copy-
12
10
1 righted collection or periodical issue, or to a copy or phonorecord of a
2 small part of any other copyrighted work, if :
3 (1) The copy becomes the property of the user, and the library
4 or archives has had no notice that the copy would be used for any
5 purpose other than private study, scholarship, or research ; and
6 (2) The library or archives displays prominently, at the place
7 where orders are accepted, and includes on its order form, a wam-
8 ing of copyright in accordance with requirements that the Reg-
9 ister of Copyrights shall prescribe by regulation.
10 (e) The rights of reproduction and distribution under this section
11 apply to the entire work, or to a substantial part of it, made from the
12 collection of a library or archives where the user makes his request or
13 from that of another library or archives, if the library or archives has
14 first determined, on the basis of a reasonable investigation that a copy
15 or phonorecord of the copyrighted work cannot be obtained at a fair
16 price, if :
17 (1) The copy becomes the property of the user, and the library
18 or archives has had no notice that the copy would be used for any
19 purpose other than private study, scholarship, or research; and
20 (2) The library or archives displays prominently, at the place
21 where orders are accepted, and includes on its order form, a wam-
22 ing of copyright in accordance with requirements that the Register
23 of Copyriglits shall prescribe by regulation.
24 (f) Nothing in this section —
25 (1) shall be construed to impose liability for copyright in-
26 fringement upon a library or archives or its employees for the un-
27 supervised use of reproducing equipment located on its premises,
28 provided that such equipment displays a notice that the making
29 of a copy may be subject to the copyright law ;
30 (2) excuses a person who uses such reproducing equipment or
31 who requests a copy under subsection (d) from liability for copy-
32 right infringement for any such act, or for any later use of such
33 f opy5 if it exceeds fair use as provided by section 107 ;
34 (3) in any way affects the right of fair use as provided by sec-
35 tion 107, or any contractual obligations assumed at any time by
36 the library or archives when it obtained a copy or phonorecord of
37 a work in its collections ;
38 (4) shall be construed to limit the reproduction and distribu-
39 tion of a limited number of copies and excerpts by a library or
13
11
1 archives of an audiovisual news program subject to clauses (1),
2 (2), and (3) of subsection (a).
3 (g) The rights of reproduction and distribution under this section
4 extend to the isolated and unrelated reproduction or distribution of a
5 single copy or phonorecord of the same material on separate occasions.
6 but do not extend to cases where the library or archives, or its
7 employee :
8 (1) is aware or has substantial reason to believe that it is
9 engaging in the related or concerted reproduction or distribution
10 of multiple copies or phonorecords of the same material, whether
11 made on one occasion or over a period of time, and whether
12 intended for aggregate use by one or more individuals or for sepa-
13 rate use by the individual members of a group ; or
14 (2) engages in the systematic reproduction or distribution of
15 single or multiple copies or phonorecords of material described
16 in subsection ( d ) .
17 (h) The rights of reproduction and distribution under this section
18 do not apply to a musical work, a pictorial, graphic or sculptural work,
19 or a motion picture or other audiovisual work other than an audio-
20 visual work dealing with news, except that no such limitation shall
21 apply with respect to rights granted by subsections (b) and (c).
22 §109. Limitations on exclusive rights: Effect of transfer of par-
23 ticular copy or phonorecord
24 (a) Notwithstanding the provisions of section 106(3), the owner of
25 a particular copy or phonorecord lawfully made under this title, or any
26 person authorized by him, is entitled, without the authority of the
27 copyright owner, to sell or otherwise dispose of the possession of that
28 copy or phonorecord.
29 (b) Notwithstanding the provisions of section 106(5), the owner
30 of a particular copy lawfully made under this title, or any person
31 authorized by him, is entitled, without the authority of the copyright
32 owner, to display that copy publicly, either directly or by the projec-
33 tion of no more than one image at a time, to viewers present at the
34 place where the copy is located.
35 (c) The privileges prescribed by subsections (a) and (b) do not,
36 unless authorized by the copyright owner, extend to any person who
37 has acquired possession of the copy or phonorecord from the copy-
38 right owner, by rental, lease, loan, or otherwise, without acquiring
39 ownership of it.
14
12
1 § 110. Limitations on exclusive rights: Exemption of certain per-
2 formances and displays
3 Notwithstanding the provisions of section 106, the following are not
4 infringements of copyright :
5 ( 1 ) performance or display of a work by instructors or pupils
6 in the course of face-to-face teaching activities of a nonprofit
7 educational institution, in a classroom or similar place devoted
8 to instruction, unless, in the case of a motion picture or other
9 audiovisual work, the performance, or the display of individual
10 images, is given by means of a copy that was not lawfully made
11 under this title, and that the person responsible for the perform-
12 ance knew or had reason to believe was not lawfully made ;
1^ (2) performance of a nondramatic literary or musicial work
1* or display of a work, by or in the course of a transmission, if :
1^ (A) the performance or display is a regular part of the
systematic instructional activities of a governmental body or
l * a nonprofit educational institution ; and
" (B) the performance or display is directly related and of
material assistance to the teaching content of the transmis-
sion ; and
(C) the transmission is made primarily for :
22
(i) reception in classrooms or similar places normally
23
19
20
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
devoted to instruction, or
(ii) reception by persons to whom the transmission is
directed because their disabilities or other special circum-
stances prevent their attendance in classrooms or similar
places normally devoted to instruction, or
(iii) reception by officers or employees of governmen-
tal bodies as a part of their official duties or employ-
ment;
(3) performance of a nondramatic literary or musical work
or of a dramatico-musical work of a religious nature, or display of
a work, in the course of services at a place of worship or other
religious assembly ;
(4) performance of a nondramatic literary or musical work
otherwise than in a transmission to the public without any pur-
pose of direct or indirect commercial advantage and without
payment of any fee or other compensation for the performance
to any of its performers, promoters, or organizers, if :
(A) there is no direct or indirect admission charge, or
15
13
1 (B) the proceeds, after deducting the reasonable costs of
2 producing the performance, are used exclusively for educa-
3 tional, religious, or charitable purposes and not for private
4 financial gain, except where the copyright owner has served
5 notice of his objections to the performance under the follow-
6 ing conditions:
7 (i) The notice shall be in writing and signed by the
8 copyright owner or his duly authorized agent; and
9 (ii) The notice shall be served on the person respon-
10 sible for the performance at least seven days before the
11 date of the performance, and shall state the reasons for
12 his objections ; and
13 (iii) The notice shall comply, in form, content, and
1^ manner of service, with requirements that the Register
15 of Copyrights shall prescribe by regulation ;
1^ (5) communication of a transmission embodying a performance
1' or display of a work by the public reception of the transmission
1° on a single receiving apparatus of a kind commonly used in pri-
19 vate homes, unless :
(A) a direct charge is made to see or hear the transmis-
sion; or
(B) the transmission thus received is further transmitted
23 to the public ;
2^ (6) performance of a nondramatic musical work in the course
■^5 of an annual agricultural or liorticultural fair or exhibition con-
"^" ducted by a governmental body or a nonprofit agricultural or hor-
■^ ' ticultural organization ;
2° (7) performance of a nondramatic musical work by a vending
establishment open to the public at large without any direct or
indirect admission charge, where the sole purpose of the perform-
ance is to promote the retail sale of copies or phonorecords of the
work and the performance is not transmitted beyond the place
^ where the establishment is located.
^ §111. Limitations on exclusive rights: Secondary transmissions
(a) Certain Secondary Transmissions Exempted. — -The second-
ary transmission of a primary transmission embodying a performance
or display of a work is not an infringement of copyright if :
(1) the secondary transmission is not made by a cable system,
and consists entirely of the relaying, by the management of a
20
21
22
29
30
38
39
hotel, apartment house, or similar establishment, of signals trans-
1
16
14
mitted by a broadcast station licensed by the Federal Communica-
2 tions Commission, within the local service area of such station, to
3 the private lodgings of guests or residents of such establishment,
4 and no direct charge is made to see or hear the secondary trans-
5 mission; or
6 (2) the secondary transmission is made solely for tlie purpose
' and under the conditions specified by clause (2) of section 110; or
8 (3) the secondary transmission is made by a common, contract,
9 or special carrier who has no direct or indii-ect control over the
10 content or selection of the primary transmission or over tlie par-
11 ticular recipients of the secondary transmission, and whose activ-
12 ities with respect to the secondary transmission consist solely of
13 providing wires, cables, or other communications channels for the
1^ use of others : Provided, That the provisions of this clause extend
15 only to the activities of said carrier with respect to secondary
1" transmissions and do not exempt from liability the activities of
1' others with respect to their own primai-y or secondary transmis-
1° sion; or
1^ (4) the secondary transmission is not made by a cable system but
2^ is made by a governmental body, or other nonprofit organization,
"1 without any purpose of direct or indirect commercial advantage,
22 and without charge to the recipients of the secondary transmission
^^ other than assessments necessary to defray tlie actual and reason-
2* able costs of maintaining and operating the secondary transmis-
25 sion service.
2" (b) Secondary Transmissiox of Primary Transmissiox to Con-
2' TROLLED Group. — Notwithstanding the provisions of subsections (a)
2o and (c), the secondary transmission to tlie public of a primary trans-
2" mission embodying a jjerformance or display of a work is actionable as
''^ an act of infringement under section 501, and is fully subject to the
^1 remedies pi'ovided by sections 502 througli 5(l(;, if the jirimary trans-
'^2 mission is not made for reception by tlic public at large but is con-
''^ trolled and limited to reception by particulai' lucuibers of the pul)lic.
^^ (c) Secoxdary Traxsmissioxs by Cable Systems. —
(1) Subject to the provisions of clause (2) of this subsection, sec-
ondary transmissions to the jDublic by a cable system of a i^rimary
*" ti-ansmission made by a broadcast station licensed by the Federal
Communications Commission and embodying a performance or dis-
play of a work shall be subject to compulsory licensing upon compli-
*0 ance with the requirements of subsection (d) in the following cases:
17
15
1 (A) Where the signals comprising the primary transmission
2 are exclusively aural and the secondai-y ti-ansmission is permis-
3 sible under the rules, regulations or authorizations of the Federal
4 Communications Commission ; or
5 (B) Where the community of the cable system is in whole or
g in part within the local service area of the primary transmitter;
7 or
8 (C) Where the carriage of the signals comprising the second-
9 ary transmission is permissible under the rules, regulations or
10 authorizations of the Federal Communications Commission.
11 (2) Notwithstanding the provisions of clause (1) of this subsection,
12 the secondary transmission to the public by a cable system of a pri-
13 mary transmission made by a broadcast station licensed by the Fed-
14: eral Communications Commission and embodying a performance or
15 display of a work is actionable as an act of infringement under section
16 501, and is fully subject to the remedies provided by sections 502
17 through 506, in the following cases :
18 (A) Where the carriage of the signals comprising the second-
19 ary transmission is not permissible under the rules, regulations
20 or authorizations of the Federal Communications Commission ; or
21 (B) IVli ere the cable system, at least one month before the date
22 of the secondary transmission, has not recorded the notice speci-
23 fied by subsection (d) .
24 (d) Compulsory License foe Secondary Transmissions by Cable
25 Systems. —
26 (1) For any secondary transmission to be subject to compulsory
27 licensing under subsection (c) , the cable system shall at least one month
28 before the date of the secondary transmission or within 30 days after
29 the enactment of this Act, whichever date is later, record in the Copy-
30 right Office, a notice including a statement of the identity and address
31 of the person who owns or operates the secondary transmission service
32 or has power to exercise primary control over it together with the
33 name and location of the primary transmitter, or primary transmit-
34 ters and thereafter, from time to time, such further information as the
35 Register of Copyrights shall prescribe by regulation to carry out the
36 jiurposes of this clause.
37 (2) A cable system whose secondary transmissions have been subject
38 to compulsory licensing under subsection (c) shall, during the months
39 of January, April, July, and October, deposit with the Register of
18
16
1 Copyrights, in accordance with requirements that the Register shall
2 prescribe by regulation —
3 (A-) A statement of account, covering the tliree months next
4 preceding, specifying the number of channels on which the cable
5 system made secondary transmissions to its subscribers, the names
6 and locations of all primary transmitters whose transmissions
7 were further transmitted by the cable system, the total number
8 of subscribers to the cable system, and the gross amounts paid to
9 the cable system irrespective of soiu-ce and separate statements of
10 the gross revenues paid to the cable system for advertising, leased
11 channels, and cable-casting for which a jier-program or per-
12 channel charge is made and by subscribers for the basic service of
13 providing secondary transmissions of primary broadcast trans-
it mitters ; and
15 (B) A total royalty fee for the period covered by the state-
ly ment, computed on the basis of specified percentages of the gross
l*"^ receipts from subscribers to the cable service during said period
18 for the basic service of providing secondary transmissions of
19 primary broadcast transmitters, as follows :
20 (i) i/o percent of any gross receipts up to $40,000 ;
21 (ii) 1 percent of any gross receipts totalling more than
22 $40,000 but not more than $80,000 ;
(iii) 11/2 percent of any gross receipts totalling more than
23
29
30
24 $80,000, but not more than $120.000 ;
25 (iv) 2 percent of any gross receipts totalling more than
26 $120,000. but not more than $160,000; and
27 (v) 214 percent of any gross receipts totalling more than
28 $160,000.
(3) The royalty fees thus deposited shall be distributed in accord-
ance with the following procedures :
•^1 (A) During the month of July in each year, every person claiming
3" to be entitled to compulsory license fees for secondary transmissions
33 made during the preceding twelve-month period shall file a claim
'^'* with the Register of Copyrights, in accordance with requirements that
^5 the Register shall prescribe by regulation. Xot withstanding any pro-
36 visions of the antitrust laws (the Act of Octobei' 15. 1914. 38 Stat. 730.
3' and any amendments of such laws), for purposes of this clause any
claimants may agree among themselves as to the proportionate divi-
sion of compulsory licensing fees among them, may lump their claims
38
39
19
17
1 together and file them jointly or as a single claim, or may designate
2 a common agent to receive payment on their behalf.
3 (B) After the first day of August of each year, the Register of
4 Copyrights shall determine whether there exists a controversy con-
5 ceming the statement of account or the distribution of royalty fees. If
6 he determines that no such controversy exists, he shall, after deduct-
7 ing his reasonable administrative costs under this section, distribute
8 such fees to the copyright owners entitled, or to their designated
^ agents. If he finds the existence of a controversy he shall certify to
10 that fact and proceed to constitute a panel of the Copyright Royalty
11 Tribunal in accordance with section 803. In such cases the reasonable
12 administrative costs of the Register under this section shall be de-
1^ ducted prior to distribution of the royalty fee by the tribunal.
1* (C) During the pendency of any proceeding under this subsection,
1^ the Register of Copyrights or the Copyright Royalty Tribunal shall
1" withhold from distribution an amount sufficient to satisfy all claims
1' with respect to which a controversy exists, but shall have discretion
1° to proceed to distribute any amounts that are not in controversy.
1^ (e) Definitions. —
As used in this section, the following terms and their variant forms
■^1 mean the following :
^^ A "primary transmission" is a transmission made to the public
2^ by the transmitting facility whose signals are being received and
further transmitted by the secondary transmission service, regard-
less of where or when the performance or display was first
transmitted.
25
26
2' A "secondary transmission" is the further transmitting of a
primary transmission simultaneously with the primary trans-
mission or nonsimultaneously with the primary transmission if by
a "cable system" not located in whole or in part within the bound-
^1 ary of the forty-eight contiguous States, Hawaii, or Puerto Rico :
Provided^ hoxoever. That a nonsimultaneous further transmission
by a cable system located in a television market in Hawaii of a
primary transmission shall be deemed to be a secondary trans-
mission if such further transmission is necessary to enable the
cable system to carry the full complement of signals allowed it
^' under the rules and regulations of the Federal Communciations
°'° Commission.
28
29
30
32
33
34
35
36
20
18
1 A "cable system" is a facility, located in any State, Territory,
2 Trust Territory or Possession that in whole or in part i-eceives
3 signals transmitted or programs broadcast by one or more tele-
4 vision broadcast stations licensed by the Federal Communications
5 Commission and makes secondary transmissions of such signals
6 or programs by wires, cables, or other communications channels
7 to subscribing members of the public who pay for such service.
8 For purposes of determining the royalty fee under subsection
9 (d) (2) (B), two or more cable systems in contiguous communi-
10 ties under common ownership or control or operating from one
11 headend shall be considered as one system.
12 The "local service area of a primary transmitter" comprises
13 the area in which a television broadcast station is entitled to
14 insist upon its signal being retransmitted by a cable system
15 pursuant to the rules and regulations of the Federal Communica-
16 tions Commission.
17 §112. Limitations on exclusive rights: Ephemeral recordings
18 (a) Notwithstanding the provisions of section 106, and except in the
19 case of a motion picture or other audiovisual work, it is not an
20 infringement of copyright for a transmitting organization entitled to
21 transmit to the public a performance or display of a work, under a
22 license or transfer of the copyright or under the limitations on exclu-
23 sive rights in sound recordings specified by section 114(a), to make
24 no more than one copy or phonorecord of a particular transmission
25 program embodying the performance or display, if —
26 (1) the copy or phonorecord is retained and used solely by the
27 transmitting organization that made it, and no further copies or
28 phonorecords are reproduced from it ; and
29 (2) the copy or phonorecord is used solely for the transmitting
30 organization's own transmissions within its local service area, or
31 for purposes of archival preservation or security ; and
32 (3) unless preserved exclusively for archival purposes, the copy
33 or phonorecord is destroyed within six months from the date the
34 transmission program was first transmitted to the public.
35 (b) Notwithstanding the provisions of section 106, it is not an in-
36 fringement of copyright for a governmental body or other nonprofit
37 organization entitled to transmit a performance or display of a work,
38 under section 110(2) or under the limitations on exclusive rights in
39 sound recordings specified by section 114(a), to make no more than
21
19
1 thirty copies or phonorecords of a particular transmission program
2 embodying the performance or display, if —
3 ( 1 ) no further copies or phonorecords are reproduced from the
4 copies or phonorecords made under this clause ; and
5 (2) except for one copy or phonorecord that may be preserved
6 exclusively for archival purposes, the copies or phonorecords are
7 destroyed within seven years from the date the transmission pro-
8 gram was first transmitted to the public.
9 (c) Notwithstanding the provisions of section 106, it is not an in-
10 fringement of copyright for a governmental body or other nonprofit
11 organization to make for distribution no more than one copy or phono-
12 record for each transmitting organization specified in clause (2) of this
13 subsection of a jjarticular transmission program embodying a perform-
14 ance of a nondramatic musical work of a religious nature, or of a sound
15 recording of such a musical work, if —
16 (1) there is no direct or indirect charge for making or dis-
17 tributing any such copies or phonorecords ; and
18 (2) none of such copies or phonorecords is used for any jDer-
19 formance other than a single transmission to the public by a trans-
20 mitting organization entitled to transmit to the public a perform-
21 ance of the work under a license or transfer of the copyright ; and
22 (3) except for one copy or plionorecord that may be preserved
23 exclusively for archival purposes, the copies or phonorecords are
24 all destroyed within one year from the date the transmission pro-
25 gram was first transmitted to the public.
26 (d) The transmission program embodied in a copy or phonorecord
27 made under this section is not subject to protection as a derivative
28 work under this title except Avith the express consent of the owners
29 of copyright in the pre-existing works employed in the program.
30 § 113. Scope of exclusive rights in pictorial, graphic, and sculp-
31 tural works
32 (a) Subject to the provisions of clauses (1) and (2) of this subsec-
33 tion, the exclusive right to reproduce a copyrighted pictorial, graphic,
34 or sculptural work in copies under section 106 includes the right to
35 reproduce the work in or on any kind of article, whether useful or
36 otherwise.
37 (1) This title does not afford, to the owner of copyright in a
38 Avork that portrays a useful article as such, any greater or lesser
39 rights with respect to the making, distribution, or display of the
40 useful article so portrayed than those afforded to such works
22
20
1 under the law, whether title 17 of the common law or statutes of
2 a State, in effect on December .'U. 1976. as held applicable and
3 construed by a court in an action brought under this title.
4 (2) In the case of a work lawfully reproduced in useful articles
5 that have been offered for sale or other distribution to the public,
6 copyright does not include any right to prevent the making, dis-
7 tribution, or display of pictures or photographs of such articles
8 in connection with advertisements or commentaries related to the
9 distribution or display of such articles, or in connectioi with news
10 reports.
11 (b) When a pictorial, graphic, or sculptural work in which copy-
12 right subsists under this title is utilized in an original ornamental
13 design of a useful article, by the copyright proprietor or under an
14 express license from him, the design shall be eligible for protection
15 under the provisions of title III of this Act.
16 (c) Protection under this title of a work in which copyright subsists
17 shall terminate with respect to its utilization in useful articles when-
18 ever the copyright proprietor has obtained registration of an orna-
19 mental design of a useful article embodying said work under the pro-
20 visions of title III of this Act. Unless and until the copyright pro-
21 prietor has obtained such registration, the copyright pictorial, graphic,
22 or sculptural work shall continue in all respects to be covered by and
23 subject to the protection afforded by the copyright subsisting under
24 this title. Nothing in this section shall be deemed to create any addi-
25 tional rights or protection under this title.
26 (d) Nothing in this section shall affect any right or remedy held
27 by any person under this title in a work in which copyright was sub-
28 sisting on the effective date of title II of this Act, or with respect to
29 any utilization of a copyrighted work other than in the design of a
30 useful article.
31 § 114. Scope of exclusive rights in sound recordings
32 (a) The exclusive rights of the owner of copyright in a sound record-
33 ing are limited to the rights specified by clauses (1) and (3) of sec-
34 tion 106, and do not include any right of performance under section
35 106(4).
36 (b) The exclusive riglit of the owner of copyright in a sound record-
37 ing to reproduce it under section 106(1) is limited to the right to
38 duplicate the sound recording in the form of plionorecords that directly
39 or indirectly recapture the actual sounds fixed in the recording. This
40 right does not extoiid to the making or duplication of anotlior soimd
23
21
1 recordinof that is an independent fixation of other sounds, even though
2 such sounds imitate or simulate those in the copyrighted sound
3 recording.
4 (c) This section does not limit or impair the exclusive right to per-
5 form publicly, by means of a phonorecord, any of the works specified
6 by section 106 (4).
7 §115. Scope of exclusive rights in nondramatic musical works:
8 Compulsory license for making and distributing phono-
9 records
10 In the case of nondramatic musical works, the exclusive rights pro-
11 vided by clauses (1) and (3) of section 106, to make and to distribute
12 phonorecords of such works, are subject to compulsory licensing under
13 the conditions specified by this section.
14 (a) Availability and Scope of Compulsory License. —
15 (1) When nhonorecords of a nondramatic musical work have
16 been distributed to the public under the authority of the copyright
17 owner, any other person may, by complying with the provisions
18 of this section, obtain a compulsory license to make and distribute
19 phonorecords of the work. A person may obtain a compulsory
20 license only if his primary purpose in making phonorecords is to
21 distribute them to the public for private use. A person may not
22 obtain a compulsory license for use of the work in the duplication
23 of a sound recording made by another.
24 (2) A compulsory license includes the privilege of making a
25 musical arrangement of the work to the extent necessary to con-
26 form it to the style or manner of interpretation of the perform-
27 ance involved, but the arrangement shall not change the basic
28 melody or fundamental character of the work, and shall not be
2^ subject to protection as a derivative work under this title, except
30 with the express consent of the copyright owner.
31 (b) Notice of Intention to Obtain Comptjlsory License ; Desig-
32 nation of Owner of Performance Right. —
33 (1) Any pei-son who wishes to obtain a compulsory license
under this section shall, before or within thirty days after making,
34
35 and before distributing any phonorecords of the work, serve notice
36 of his intention to do so on the copyright owner. If the registra-
37 tion or other public records of the Copyright Office do not identify
38 the copyright owner and include an address at which notice can
3^ be served on him, it shall be sufficient to file the notice of intention
^ in the Copyright Office. The notice shall comply, in form, con-
32
33
24
22
1 tent, and manner of service, with requirements that the Eegister
2 of Copyrights shall prescribe by regulation.
3 (2) If the copyright owner so requests in writing not later than
4 ten days after service or filing of the notice required by clause ( 1 ) ,
5 the person exercising the compulsory license shall designate, on
6 a label or container accompanying each phonorecord of the work
7 distributed by him, and in the form and manner that the Eegister
8 of Copyrights shall prescribe by regulation, the name of the
9 copyright owner or his agent to whom royalties for public per-
10 formance of the work are to be paid.
11 • (3) Failure to serve or file the notice required by clause (1), or
12 to designate the name of the owner or agent as required by clause
13 (2), forecloses the possibility of a compulsory license and, in the
14 absence of a negotiated license, renders the making and distribu-
15 tion of phonorecords actionable as acts of infringement under
16 section 501 and fully subject to the remedies provided by sections
17 502 through 506.
18 (c) RoTALTT Payable Under Compulsory License. —
19 (1) To be entitled to receive royalties under a compulsory
20 license, the copyright owner must be identified in the registration
21 or other public records of the Copyright Office. The owner is
22 entitled to royalties for phonorecords manufactured and distrib-
23 uted after he is so identified but he is not entitled to recover for
24 any phonorecords previously manufactured and distributed.
25 (2) Except as provided by clause (1), the royalty under a
26 compulsory license shall be payable for every phonorecord manu-
27 factured and distributed in accordance with the license. With
28 respect to each work embodied in the phonorecord, the royalty
29 shall be either three cents, or three quarter cent per minute of
30 playing time or fraction thereof, whichever amount is larger.
31 (3) Royalty payments shall be made on or before the twentieth
day of each month and shall include all royalties for the month
next preceding. Each monthly payment shall be accompanied
"^ by a detailed statement of account, which shall be certified by a
35 Certified Public Accountant and comply in form, content, and
36 manner of certification with I'equirements that the Register of
37 Copyrights shall prescribe by regulation.
(4) If the copyright owner does not receive the monthly pay-
ment and statement of account when due, he may give written
40 notice to the licensee that, unless the default is remedied within
38
39
25
23
1 thirty daj's from the date of the notice, the compulsory license
2 will be automatically terminated. Such termination renders the
3 making and distribution of all phonorecords, for wliich the roy-
4 alty had not been paid, actionable as acts of infringement under
5 section 501 and fully subject to the remedies provided by sections
6 502 through 506.
7 §116. Scope of exclusive rights in nondramatic musical works:
8 Public performances by means of coin-operated phono-
9 record players
10 (a) Limitation on Exclusive Right. — In the case of a non-
11 dramatic musical work embodied in a phonorecord, the exclusive right
12 under clause (4) of section 106 to perform the work publicly by means
13 of a coin-operated phonorecord player is limited as follows:
14 (1) The proprietor of the establishment in which the public
15 performance takes place is not liable for infringement with re-
16 spect to such public performance unless :
17 (A) he is the operator of the phonorecord player ; or
18 (B) he refuses or fails, within one month after receipt by
19 registered or certified mail of a request, at a time during
20 which the certificate is required by subclause (1) (C) of sub-
21 section (b) is not affixed to the phonorecord player, by the
22 copyright owner, to make full disclosure, by registered or
23 certified mail, of the identity of the operator of the phono-
24 record player.
25 (2) The operator of the coin-operated phonorecord player may
26 obtain a compulsory license to perform the work publicly on that
27 phonorecord player by filing the application, affixing the certifi-
28 cate, and paying the royalties provided by subsection (b).
29 (b) Recordation of Coin-Operated Phonorecord Player, Affixa-
30 tion of Certificate, and Royalty Payable Under Compulsory
31 License. —
(1) Any operator who wishes to obtain a compulsory license
for the- public performance of works on a coin-operated phono-
34 record player shall fulfill the following requirements:
35 (A) Before or within one month after such performances
are made available on a particular phonorecord player, and
32
33
36
3' during the month of January in each succeeding year that
3^ such performances are made availal)le in that particular
39 phonorecord player, he shall file in the Copyright Office, in
^^ accordance with requirements that the Register of Copyrights
cT-Toc r-\ _ nc
26
24
1 shall prescribe by regulation, an application containing the
2 name and address of the operator of the phonorecord player
3 and the manufacturer and serial number or other explicit
4 identification of the phonorecord player, and in addition to
5 the fee prescribed by clause (9) of section T08(a), he shall
6 deposit with the Register of Copyrights a royalty fee for
7 the current calendar year of $8 for that particular phono-
8 record player. If such performances are made available on a
9 particular phonorecord player for the first time after July 1
10 of any year, the royalty fee to be deposited for the remainder
11 of that year shall be $4.00.
12 (B) Within twenty days of receipt of an application and a
13 royalty fee pursuant to subclause ( A) , the Register of Copy-
14 rights shall issue to the applicant a certificate for the phono-
15 record player.
16 (C) On or before March 1 of the year in which the certifi-
17 cate prescribed by subclause (B) of this clause is issued, or
18 within ten days after the date of issue of the certificate, the
19 operator shall affix to the particular phonorecord player, in a
20 position where it can be readily examined by the public, the
21 certificate, issued by the Register of Copyrights under sub-
22 clause (B), of the latest application made by him under sub-
23 clause (A) of tins clause with respect to that phonorecord
24 player.
25 (2) Failure to file the application, to affix the certificate or to
26 pay the royalty required by clause (1) of this subsection renders
27 the public performance actionable as an act of infringement under
28 section 501 and fully subject to the remedies provided by section
29 502 through 506.
30 (c) Distribution OF RoYAi/TTES. —
31 (1) During the month of January in each year, every pei-son
32 claiming to be entitled to compulsory license fees under this section
33 for performances during the preceding twelve-month period shall
34 file a claim with the Register of Copyrights, in accordance with
35 requirements that the Register shall prescribe by regidation.
36 Such claim shall include an agreement to accept as final, except as
37 provided in section 809 of this title, the determination of the Copy-
38 right Royalty Tribunal in any controversy concerning the distri-
39 bution of royalty fees deposited under subclause (a) of subsec-
40 tion (b) (1) of this section to which the claimant is a party. Not-
27
25
1 withstanding any provisions of the antitrust laws (the Act of
2 October 15, 1914, 38 Stat. 730, and any amendments of any such
3 laws), for purposes of this subsection any claimants may agree
4 among themselves as to the proportionate division of compulsory
5 licensing fees among them, may lump their claims together and
6 file them jointly or as a single claim, or many designate a common
7 agent to receive payment on their behalf.
8 (2) After the first day of October of each year, the Register of
9 Copyrights shall determine whether there exists a controversy
10 concerning the distribution of royalty fees deposited under sub-
11 clause (A) of subsection (b) (1). If he determines that no such
12 controversy exists, he shall, after deducting his reasonable ad-
13 ministrative costs under this section, distribute such fees to the
14 copyright owners and performers entitled, or to their designated
15 agents. If he finds that such a controversy exists, he shall certify
16 to that fact and proceed to constitute a panel of the Copyright
17 Royalty Tribunal in accordance with section 803. In sucli cases the
18 reasonable administrative costs of the Register under this section
19 shall be deducted prior to distribution of the royalty fee by the
20 tribunal.
21 (3) The fees to be distributed shall be divided as follows:
22 (A) To every copyright owner not affiliated with a jserform-
23 ing rights society the pro rata share of the fees to be dis-
24 tributed to which such copyright owner proves liis entitle-
25 ment; and
26 (B) To the performing rights societies the remainder of
27 the fees to be distributed in such pro rata shares as they shall
28 by agreement stipulate among themselves, or, if they fail to
29 agree, the pro rata share to which such performing rights
30 societies prove their entitlement.
31 (C) During the pendency of any proceeding under this
32 section, tlie Register of Copyrights or the Copyright Royalty
33 Tribunal shall withhold from distribution an amount suffi-
34 cient to satisfy all claims with respect to which a controversy
35 exists, but shall have discretion to proceed to distribute any
36 amounts that are not in controversy.
37 (4) The Register of Copyrights sliall promulgate regulations
38 under which persons who can reasonably be expected to have
39 claims may, during the year in which performances take place,
40 without expense to or harassment of operators or proprietors of
28
26
1 establishments in which phonorecord players are located, have
2 such access to such establishments and to the phonorecord players
3 located therein and such opportunity to obtain information with
4 respect thereto as may be reasonably necessary to determine, by
5 sampling procedures or otherwise, the proportion of contribution
6 of the musical works of each such person to the earnings of the
7 phonorecord players for which fees shall have been deposited.
8 Any person who alleges that he has been denied the access per-
9 mitted under the regulations prescribed by the Register of Copy-
10 rights may bring on an action in the United States District Court
11 for the District of Columbia for the cancellation of the compul-
12 sory license of the phonorecord player to which such access has
13 been denied, and the court shall have the power to declare the
14 compulsory license thereof invalid from the date of issue thereof.
15 (d) Criminal Penalties. — Any person who knowingly makes a
16 false representation of a material fact in an application filed under
17 clause (1) (A) of subsection (b), or who knowingly alters a certificate
18 issued under clause (1)(B) of subsection (b) or knowingly affixes
19 such a certificate to a phonorecord player other than the one it covers,
20 shall be fined not more than $2,500.
21 (e) Definitions. — As used in this section, the following tenns and
22 their variant forms mean the following :
23 (1) A "coin-operated phonorecord player" is a machine or
24 device that:
25 (A) is employed solely for the performance of non-
26 dramatic musical works by means of phonorecords upon being
27 activated by insertion of a coin ;
28 (B) is located in an establishment making no dii-ect or
29 indirect charge for admission ;
30 (C) is accompanied by a list of the titles of all the musical
31 works available for performance on it, which list is affixed to
32 the phonorecord player or posted in the establishment in a
33 prominent position where it can be readily examined by the
34 public; and
35 (D) affords a choice of works available for performance
36 and permits the choice to be made by the patrons of the
37 establishment in which it is located.
38 (2) An "operator" is any person who, alone or jointly with
39 others :
40 (A) owns a coin-operated phonorecord player ; or
29
27
1 (B) has the power to make a coin-operated phonorecord
2 player available for placement in an establishment for pur-
3 poses of public performance ; or
4 (C) has the power to exercise primary control over the
5 selection of the musical works made available for public
6 performance in a coin-operated phonorecord player.
7 (3) A "performing rights society" is an association or corpora-
8 tion that licenses the public performance of nondramatic nmsical
9 works on behalf of the copyright owners, such as the American
10 Society of Composers, Authors and Publishers, Broadcast Music,
11 Inc., and SESAC, Inc.
12 §117. Scope of exclusive rights: Use in conjunction with com-
13 puters and similar information systems
14 Notwithstanding the provisions of sections 106 through 116, this
15 title does not afford to the owner of copyright in a work any greater
16 or lesser rights with respect to the use of the work in conjunction with
17 automatic systems capable of storing, processing, retrieving, or trans-
18 ferring information, or in conjunction with any similar device, ma-
19 chine, or process, than those afforded to works under the law, whether
20 title 17 or the common law or statutes of a State, in effect on Decem-
21 ber 31, 1976, as held applicable and construed by a court in an action
22 brought under this title.
23 Chapter 2.— COPYRIGHT OWNERSHIP AND TRANSFER
See.
201. Ownership of copyright.
202. Ownership of copyright as distinct from ownership of material object.
203. Termination of transfers and licenses granted by the author.
204. Execution of transfers of copyright ownership.
205. Recordation of transfers and other documents.
24 § 201. Ownership of copyright
25 (a) Initial Ownership. — Copyright in work protected under this
26 title vests initially in the author or authors of the work. The authors
27 of a joint work are co-ownei*s of copyright in the work.
28 (b) Works Made for HrRE. — In tlie case of a work made for hire,
29 the employer or other persons for whom the work was prepared is
30 considered the author for purposes of this title, and, unless the parties
31 have expressly agreed otherwise in a written instrument signed by
32 them, owns all of the rights comprised in the copyright.
33 (c) Contributions TO Collective Works. — Copyright in each sep-
34 arate contribution to a collective work is distinct from copyright in
35 the collective work as a whole, and vests initially in the author of the
36 contribution. In the absence of an express transfer of the copyright
30
28
1 or of any rights under it, the owner of copyright in the collective
2 work is presumed to have acquired only the privilege of reproducing
3 and distributing the contribution as part of that particular collective
4 work, any revision of that collective work, and any later collective
5 work in the same series.
6 (d) Transfer OF Ownership. —
7 (1) The ownership of a copyright may be transferred in whole
8 or in part by any means of conveyance or by operation of law, and
9 may be bequeathed by will or pass as personal property by the
10 applicable laws of intestate succession.
11 (2) Any of the exclusive rights comprised in a copyright,
12 including any subdivision of any of the rights specified by section
13 106, may be transferred as provided by clause ( 1 ) and owned sepa-
ls rately. The owner of any particular exclusive right is entitled, to
15 the extent of that right, to all of the protection and remedies
16 accorded to the copyright owner by this title.
17 § 202. Ownership of copyright as distinct from ownership of
18 material object
19 Ownership of a copyright, or of any of the exclusive rights under
20 a copyright, is distinct from ownership of any material object in
21 which the work is embodied. Transfer of ownership of any material
22 object, including the copy or phonorecord in which the work is first
23 fixed, does not of itself convey any rights in the copyrighted work
24 embodied in the object; nor, in the absence of an agreement, does
25 transfer of ownership of a copj^right or of any exclusive rights under
26 a copyright convey property rights in any material object.
27 § 203. Termination of transfers and licenses granted by the author
28 (a) Conditions for Termination. — In the case of any work other
29 than a work made for hire, the exclusive or nonexclusive grant of a
30 transfer or license of copyright or of any right under a copyright,
31 executed by the author on or after January 1, 1977, otherwise than
32 by will, is subject to termination under the following conditions :
33 (1) In the case of a grant executed by one author, termination
34 of the grant may be effected by that author or, if he is dead, by
35 the person or persons who, under clause (2) of this subsection,
36 own and are entitled to exercise a total of more than one half of
37 that author's termination interest. In the case of a grant executed
38 by two or more authors of a joint work, termination of the grant
39 may be effected by a majority of the authors who executed it;
40 if any of such authors is dead, his termination interest may be
31
29
1 exercised as a unit by the person or persons who, under clause (2)
2 of this subsection, own and are entitled to exercise a total of more
3 than one half of his interest.
4 (2) Where an author is dead, his or her termination interest is
5 owned, and may be exercised, by his widow (or her widower) and
6 children or grandchildren as follows :
7 (A) The widow (or widower) owns the author's entire ter-
8 mination interest unless there are any surviving children or
9 grandchildren of the author, in which case the widow (or
10 widower) owns one half of the author's interest;
11 (B) The author's surviving children, and the surviving
12 children of any dead child of the author, own the author's
13 entire termination interest unless there is a widow (or wid-
14 ower) , in which case the ownership of one half of the author's
15 interest is divided among them ;
16 (C) The rights of the author's children and grandchildren
17 are in all cases divided among them and exercised on a per
18 stirpes basis according to the number of his children repre-
19 sented ; the share of the children of a dead child in a termina-
20 tion interest can be exercised only by the action of a majority
21 of them.
22 ( 3 ) Termination of the grant may be effected at any time during
23 a period of five years beginning at the end of thirty -five years from
24 the date of execution of the grant ; or, if the grant covers the right
25 of publication of the work, the period begins at the end of thirty-
26 five years from the date of publication of the work under the grant
27 or at the end of forty years from the date of execution of the
28 grant, whichever term ends earlier.
29 (4) The termination shall be effected by serving an advance
30 notice in writing, signed by the number and proportion of owners
31 of termination interests required under clauses (1) and (2) of this
32 subsection, or by their duly authorized agents, upon the grantee
33 or his successor in title.
34 (A) The notice shall state the effective date of the t«rmina-
35 tion, which shall fall within the five-year period specified by
36 clause (3) of this subsection, and the notice shall be served
37 not less than two or more than ten years before that date. A
38 copy of the notice shall be recorded in the Copyright Office
39 before the effective date of termination, as a condition to its
40 taking effect.
32
30
1 (B) The notice shall comply, in form, content, and man-
2 ner of service, with requirements that the Register of Copy-
3 rights shall prescribe by regulation.
4 (5) Termination of the grant may be effected notwithstand-
5 ing any agreement to the contrary, including an agreement to
6 make a will or to make any future grant.
7 (b) Effect of Termination. — Upon the effective date of termina-
8 tion, all rights under this title that were covered by the terminated
9 grant revert to the author, authors, and other persons owning termi-
10 nation interests under clauses (1) and (2) of subsection (a), includ-
11 ing those owners who did not join in signing the notice of termination
12 under clause (4) of subsection (a) but, with the following limitations :
13 (1) -A- derivative work prepared under authority of the grant
14 before its termination may continue to be utilized under the terms
15 of the grant after its termination, but this privilege does not ex-
16 tend to the preparation after the termination of other derivative
17 works based upon the copyrighted work covered by the terminated
18 grant.
19 (2) The future rights that will revert upon termination of the
20 grant become vested on the date the notice of termination has
21 been served as provided by clause (4) of subsection (a). The
22 rights vest in the author, authors, and other persons named in,
23 and in the proportionate shares provided by, clauses (1) and (2)
24 of subsection (a).
25 (3) Subject to the provisions of clause (4) of this subsection,
26 a further grant, or agreement to make a further grant, of any
27 right covered by a terminated grant is valid only if it is signed
28 by the same number and proportion of the owners, in whom the
29 right has vested under clause (2) of this subsection, as are re-
30 quired to terminate the grant under clauses (1) and (2) of sub-
31 section (a). Such further grant or agreement is effective with
32 respect to all of the persons in whom the right it covers has vested
33 under clause (2) of this subsection, including those who did not
34: join in signing it. If any person dies after rights under a ter-
35 minated grant have vested in him, his legal representatives,
36 legatees, or heirs at law represent him for purposes of this clause.
37 (4) A further grant, or agreement to make a further grant, of
38 any right covered by a terminated grant is valid only if it is made
39 after the effective date of the termination. As an exception, how-
40 ever, an agreement for such a further grant may be made between
33
31
1 the persons provided by clause (3) of this subsection and the
2 original grantee or his successor in title, after the notice of termi-
3 nation has been served as provided by clause (4) of subsection (a) .
4 (5) Termination of a grant under this section affects only those
5 i-ights covered by the grant tluit arise under this title, and in no
6 way affects rights arising under any other Federal, State, or for-
7 eign laws.
8 (6) Unless and until termination is etl'ected under this section,
9 tlie grant, if it does not provide otherwise, contiiiues in effect for
10 the term of copyright provided by this title.
11 §204. Execution of transfers of copyright ownership
12 (a) A transfer of copyright ownership, other than by operation of
13 law, is not valid unless an instrument of conveyance, or a note or
14 memorandum of the transfer, is in writing and signed by the owner
15 of the rights conveyed or his duly authorized agent.
16 (b) A certificate of acknowledgement is not required for the valid-
17 ity of a transfer, but is prima facie evidence of the execution of the
18 transfer if:
19 (1) in the case of a transfer executed in the United States, the
20 certificate is issued by a person authorized to administer oaths
21 within the United States ; or
22 (2) in the case of a transfer executed in a foreign country, the
23 certificate is issued by a diplomatic or consular officer of the
24 United States, or by a person authorized to administer oaths
25 whose authority is proved by a certificate of such an officer.
26 § 205. Recordation of transfers and other documents
27 (a) CoxDiTioxs for Recordatiox. — Any transfer of copyright own-
28 ership or otlier document pertaining to a copyright may be recorded
29 in the Copyright Office if the document filed for recordation bears the
30 actual signature of the person who executed it, or if it is accompanied
31 by a sworn or official certification that it is a true copy of the original.
32 signed document.
33 (b) Certificate of Eecordatiox. — The Register of Copyrights
34 shall, upon receipt of a document as provided by subsection (a) and
35 of the fee provided by section 708, record the document and return it
36 with a certificate of recordation.
37 (c) Recordatiox as Cox'structive Notice. — Recordation of a docu-
38 ment in the Copyright Office gives all persons constructive notice of the
39 facts stated in the recorded document, but only if :
34
32
1 (1) the document, or material attached to it, specifically identi-
2 fies the work to which it pertains so that, after the document is
3 indexed by the Register of Copyrights, it would be revealed by a
4 reasonable search under the title or registration number of the
5 work ; and
6 (2) registration has been made for the work.
' (d) Recordation as Prerequisite to Infringement Suit. — No per-
° son claiming by virtue of a transfer to the owner of copyright or of
^ any exclusive right under a copyright is entitled to institute an in-
^^ fringement action under this title until the instrument of transfer
^^ under which he claims has been recorded in the Copyright Office, but
•'■^ suit may be instituted after such recordation on a cause of action that
^^ arose before recordation.
(e) Priority Between Conflicting Transfers. — As between two
^^ conflicting transfers, the one executed first prevails if it is recorded, in
the manner required to give constructive notice under subsection (c)
within one month after its execution in the United States or within two
1 Q
months after its execution abroad, or at any time before recordation in
such manner of the later transfer. Otherwise the later transfer prevails
if recorded first in such manner, and if taken in good faith, for valu-
able consideration or on the basis of a binding promise to pay royal-
ties, and without notice of the earlier transfer.
(f) Priority Between Conflicting Transfer of Ownership and
^ Nonexclusive License. — A nonexclusive license, whether recorded or
not, prevails over a conflicting transfer of copyright ownership if the
26 • • •
license is evidenced by a written instrument signed by the owner of the
rights licensed or his duly authorized agent, and if :
(1) the license was taken before execution of the transfer; or
(2) the license was taken in good faith before recordation of
the transfer and without notice of it.
Chapter 3.— DURATION OF COPYRIGHT
Sec. •
301. Pre-emption with respect to other laws.
302. Duration of oopyright : Works created on or after January 1, 1977.
30.3. Duration of copyright : Works created but not published or copyrighted
before .January 1, 1077.
304. Duration of copyright : Subsisting copyrights.
305. Duration of copyright : Terminal date.
32 § 301. Pre-emption with respect to other laws
33 (a) On and after Januat y 1. 107.7. all riirhts in the nature of cnpy-
34 right in works that como within tlie subject matter of copyright as
35 specified by sections 102 and 103, whether created before or after that
16
17
20
21
22
23
27
28
29
30
31
35
33
1 date and whether published or unpublished, are governed exclusively
2 by this title. Thereafter, no person is entitled to copyright, literary
3 property rights, or any equivalent legal or equitable right in any such
4 work under the common law or statutes of any State.
5 - (b) Nothing in this title annuls or limits any rights or remedies
6 under the common law or statutes of any State with respect to :
T ( 1 ) unpublished matei-ial that does not come within the subject
8 matter of copyright as specified by sections 102 and 103, including
9 works of authorship not fixed in any tangible medium of ex-
10 pression ;
11 (2) any cause of action arising from undertakings commenced
12 before January 1, 1977;
13 (3) activities violating rights that are not equivalent to any of
14 the exclusive rights within the general scope of copyright as speci-
15 fied by section 106, including breaches of contract, breaches of
16 trust, invasion of privacy, defamation, and deceptive trade prac-
1*^ tioes such as passing off and false representation.
18 §302. Duration of copyright: Works created on or after Janu-
19 ary 1, 1977
20 (a) In General. — Copyright in a woi'k created on or after January
21 1, 1977, subsists from its creation and. except as provided by the
22 following subsections, endures for a term consisting of the life of the
23 author and fifty years after his death.
24 (b) Joint Works. — In the case of a joint work prepared by two
25 or more authors who did not work for hire, the copyright endures for
26 a term consisting of the life of the last surviving author and fifty
27 years after his death.
28 (c) Anonymous Works, Pseudonymous Works, and Works Made
29 for Hire. — In the case of an anonymous work, a pseudonymous work
30 or a work made for hire, the copyright endures for a term of seventy-
31 five years from the year of its first publication, or a term of one
32 himdred years from the year of its creation, whichever expires first.
33 If, before the end of such term, the identity of one or more of the
34 authors of an anonymous or pseudonymous work is revealed in the
35 records of a registration made for that work under subsection (a)
36 or (d) of section 407, or in the records prov-ided by this subsection,
37 the copyright in the work endures for the term specified by subsections
38 (a) or (b), based on tlie life of the author or authors whose identity
39 has been i-evealed. Any person having an intei"est in the copyright in
40 an anonymous or pseudonymous work may at any time record, in
36
34
1 records to be maintained by the Copyright Office for that purpose, a
2 statement identifying one or more authors of the work ; the statement
3 shall also identify the person filing it, the nature of his interest, the
4 source of his information, and the particular work affected, and shall
5 comply in form and content witli requirements that the Register of
6 Copyrights shall prescribe by regulation.
7 (d) Records Relating to Death of Authobs. — Any person having
8 an interest in a copyright may at any time record in the Copyright
9 Office a statement of the date of death of the author of the copy-
10 righted work, or a statement that the author is still living on a par-
11 ticular date. The statement shall identify the pereon filing it, the
12 nature of his interest, and the source of his information, and shall
13 comply in form and content with requirements that the Register
14 of Copyrights shall prescribe by regulation. The Register shall main-
15 tain current records of information relating to the death of authors
16 of copyrighted works, based on such recorded statements and, to the
17 extent he considers practicable, on data contained in any of the records
18 of the Copyright Office or in other reference sources.
19 (e) Presumption as to Author's Death. — After a period of seventy-
20 five years from the year of first publication of a work, or a period
21 of one hundred years from the year of its creation, whichever expires
22 first, any person who obtains from the Copyright Office a certified re-
23 port that the records provided by subsection (d) disclose nothing to
24 indicate that the author of the work is living, or died less than fifty
25 years before, is entitled to the benefit of a presumption that the author
26 has been dead for at least fifty years. Reliance in good faith upon this
27 presumption shall be a complete defense to any action for infringe-
28 ment under this title.
29 § 303. Duration of copyright . Works created but not published
30 or copyrighted before January 1, 1977
31 Copyright in a work created before January 1, 1977, but not thereto-
32 fore in the public domain or copyrighted, subsists from January 1,
33 1977, and endures for the term provided by section 302. In no case,
34 however, shall the term of copyright in such a work expire before
December 31, 2001 ; and, if the work is published on or before December
31, 2001, the term of copyright shall not expire before December 31,
35
36
37 2026.
38 § 304. Duration of copyright: Subsisting copyrights
39 (a) Copyrights in Their First Term on January 1, 1977. — Any
40 copyright, the first term of which is subsisting on January 1, 1977,
37
35
1 shall endure for twenty-eight years from the date it was originally
2 secured : Provided. That in the case of any posthumous work or of any
3 periodical, cyclopedic, or other composite work upon wliich the copy-
4 right was originally secured by the proprietor thereof, or of any work
5 copyrighted by a corporate body (otherwise than as assignee or li-
6 c*nsee of the individual author) or by an employer for whom such
7 work is made for hire, the proprietor of such copyright shall be en-
8 titled to a renewal and extension of the copyright in such work for the
9 further term of forty-seven years when application for such renewal
10 and extension shall have been made to the Copyriglit Office and duly
11 registered therein within one year prior to the expiration of the origi-
12 ual term of copyriglit : And pi'ovided further. That in the case of any
13 other copyrighted work, including a contribution by an individual
14: author to a periodical or to a cyclopedic or other composite work, the
15 author of such work, if still living, or the widow, widower, or children
16 of the author, if the author be not living, or if such author, widow,
1' widower, or children be not living, then the author's executore, or in
18 the absence of a will, his next of kin shall be entitled to a renewal and
19 extension of the copyright in such work for a further term of forty-
20 seven years when application for such renewal and extension shall
21 have been made to the Copyright Office and duly registered therein
22 within one year prior to the expiration of the original term of copy-
23 right : Aiul provided further. That in default of tlie registration of
24 such application for renewal and extension, the copyright in any work
25 shall terminate at the expiration of twenty-eight years from the date
26 copyright was originally secured.
27 (b) Copyrights in Their Renewal. Term or Registered for Re-
28 newal Before January 1, 1977. — The duration of any copyright, the
29 renewal term of whicli is subsisting at any time between December 31,
30 1975, and December 31, 197G. inclusive, or for which renewal registra-
31 tion is made between December 31, 1975, and December 31. 1976,
32 inclusive, is extended to endure for a term of 75 years from the date
33 copyright was originally secured.
34 (c) Termination of Transfers and Licenses Covering Extended
35 Renewal Term. — In the case of any copyright subsisting in either
36 its first or renewal term on January 1. 1977. other than a copyright
37 in a work made for liire, the exclusive or nonexclusive grant of a trans-
38 fer or license of the renewal copyright or of any right under it,
39 executed before January 1, 1977, by any of the persons designated by
38
36
1 the second proviso of subsection (a) of this section, otherwise than by
2 will, is subject to termination under the following condition :
3 ( 1 ) In the case of a grant executed by a person or persons other
4 than the author, termination of the grant may be effected by the
5 surviving person or persons who executed it. In the case of a
6 grant executed by one or more of the authors of the work, termina-
7 tion of the grant may be effected, to the extent of a particular
8 author's share in the ownership of the renewal copyright, by the
9 author who executed it or, if such author is dead, by the person or
10 persons who, under clause (2) of this subsection, own and are
11 entitled to exercise a total of more than one half of that author's
12 termination interest.
13 (2) Where an author is dead, his or her termination interest is
14 owned, and may be exercised, by his widow (or her widower) and
15 children or grandchildren as follows :
1" (A) The widow (or widower) owns the author's entire
1' termination interest unless there are any surviving children
1° or grandchildren of the author, in which case the widow (or
19 widower) owns one half of the author's interest;
^ (B) The author's surviving children, and the surviving
21 children of any dead child of the author, own the author's
22 entire termination interest unless there is a widow (or wid-
23 ower) , in which case the ownership of one half of the author's
24 interest is divided among them ;
25 (C) The rights of the author's children and grandchildren
26 are in all cases divided among them and exercised on a per
27 stirpes basis according to tlie number of his children repre-
28 sented ; the share of the children of a dead child in a termina-
ls tion interest can be exercised only by the action of a major-
30 ity of them.
"1 (3) Termination of the grant may be effected at any time dur-
ing a period of five years beginning at the end of fifty-six years
form the date copyright was originally secured, or beginning on
January 1, 1977, whichever is later.
(4) The termination shall be effected by serving an advance
notice in writing upon the grantee or his successor in title. In the
case of a gi-ant executed by a person or persons other than the
author, the notice shall be signed by all of those entitled to termi-
nate the grant under clause (1) of this subsection, or by their duly
authorized agents. In the case of a grant executed by one or more
32
33
34
35
36
37
38
39
40
39
37
1 of the authors of the work, the notice as to any one author's share
2 shall be signed by him or his duly authorized agent or, if he is
3 dead, by the number and proportion of the owners of his termina-
4 tion interest required under clauses (1) and (2) of this subsection,
5 or by their duly authorized agents.
6 (A) The notice shall state the eflfective date of the termi-
7 nation, which shall fall within the five-year period specified
8 by clause (3) of this subsection, and the notice shall be served
9 not less than two or more than ten years before that date. A
10 copy of the notice shall be recorded in the Copyright Office
11 before the effective date of termination, as a condition to its
12 taking effect.
13 (B) The notice shall comply, in foi-m, content, and manner
14 of service, with requirements that the Register of Copyrights
15 shall prescribe by regulation.
16 (5) Termination of the grant may be effected notwithstanding
17 any agreement to the contrary, including an agreement to make
18 a will or to make any future grant.
19 (6) In the case of a grant executed by a person or persons other
20 than the author, all rights under this title that were covered by
21 the terminated grant revert, upon the effective date of termination,
22 to all of those entitled to terminate the grant under clause (1) of
23 this subsection. In the case of a grant executed by one or more
24 of the authors of the work, all of a particular author's rights
25 under this title that were covered by the terminated grant revert,
26 upon the effective date of termination, to that author or, if he is
27 dead, to the persons owning his termination interest under clause
28 (2) of this subsection, including those owners who did not join
29 in signing the notice of termination under clause (4) of this sub-
30 section. In all cases the reversion of rights is subject to the follow-
31 ing limitations :
32 (A) A derivative work prepared under authority of the
33 grant before its termination may continue to be utilized under
34 the terms of the grant after its termination, but this privilege
35 does not extend to the preparation after the t-ermination of
36 other derivative works based upon the copyrighted work cov-
37 ered by the terminated grant.
38 (B) The future rights that will revert upon termination
39 of the trrant become vested on the date the notice of termi-
40
38
10
^ nation has been served as provided by clause (4) of this
^ subsection.
^ (C) Where an author's rights revert to two or more per-
* sons under clause (2) of. this subsection, they shall vest in
^ those persons in the proportionate shares provided by that
^ clause. In such a case, and subject to the provisions of sub-
• clause (D) of this clause, a further grant, or agreement to
° make a further grant, of a particular author's share with
^ respect to any right covered by a terminated grant is valid
only if it is signed by the same number and proportion of
11 the owners, in whom the right has vested under this clause,
12 as are required to terminate the grant under clause (2) of
13 this subsection. Such further grant or agreement is effective
14 with respect to all of the persons in whom the right it
15 covers has vested under this subclause, including those who
16 did not join in signing it. If any person dies after rights
17 under a terminated grant have vested in him, his legal repre-
18 sentatives, legatees, or heirs at law represent him for purposes
19 of this subclass.
20 (D) A further grant, or agreement to make a further
21 grant, of any right covered by a terminated grant is valid
22 only if it is made after the effective date of the termination.
23 As an exception, however, an agreement for such a further
24 grant may be made between the author or any of the per-
25 sons provided by the first sentence of clause (6) of this
26 subsection, or between the persons provided by subclause
27 (C) of this clause, and the original grantee or his successor
28 in title, after the notice of termination has been served as
29 provided by clause (4) of this subsection.
30 (E) Termination of a grant under this subsection affects
31 only those rights covered by the grant that arise under this
32 title, and in no way affects rights arising under any other
33 Federal,State, or foreign laws.
34 (F) Unless and until termination is effected under this
35 section, the grant, if it does not provide otherwise, continues
36 in effect for the remainder of the extended renewal term.
37 § 305. Duration of copyright : Terminal date
38 All terms of copyright provided by sections 302 through 304 run to
39 the end of the calendar year in which they would otherwise expire.
41
39
1 Chapter 4.— COPYRIGHT NOTICE, DEPOSIT, AND
2 REGISTRATION
Sec.
401. Notice of copyright : Visually perceptible copies.
402. Notice of copyright : Phonorecords of sound recordings.
403. Notice of copyright : Publications incorporating United States Government
works.
404. Notice of copyright : Contributions to collective works.
405. Notice of copyright : Omission of notice.
406. Notice of copyright : Error in name or date.
407. Deposit of copies or phonorecords for Library of Congress.
408. Copyright registration in general.
409. Application for registration.
410. Registration of claim and Issuance of certificate.
411. Registration as prerequisite to infringement suit.
412. Registratiou as prerequisite to certain remedies for infringement.
3 § 401. Notice of copyright : Visually perceptible copies
4 (a) General Requirement. — ^Whenever a -work protected under
5 this title is published in the United States or elsewhere by authority
6 of the copyright owner, a notice of copyright as provided by this sec-
7 tion shall be placed on all publicly distributed copies from which the
8 work can be visually perceived, either directly or with the aid of a
9 machine or device.
10 (b) Form of Notice. — The notice appearing on the copies shall con-
11 sist of the following three elements :
12 (1) the symbol © (the letter C in a circle), the word "Copy-
13 right," or the abbreviation "Copr.'' ;
14 (2) the year of first publication of the work: in the case of
15 compilations or derivative works incorporating previously pub-
16 lished material, the year date of first publication of the compila-
17 tion or derivative work is sufficient. The year date may be omitted
18 where a j^ictorial, graphic, or sculptural work, with accompanying
19 text matter, if any. is reproduced in or on greeting cards, post-
20 cards, stationery, jewelry, dolls, toys, or any useful articles ;
21 (3) the name of the owner of copyright in the work, or an ab-
22 breviation by which the name can be recognized, or a generally
23 known alternative designation of the owner.
24 (c) Position of Notice. — The notice shall be affixed to the copies in
25 such manner and location as to give reasonable notice of the claim
26 of copyright. The Register of Copyrights shall prescribe by regula-
27 tion, as examples, specific methods of affixation and positions of the
28 notice on various types of woi-ks that will satisfy this requirement, but
29 these specifications shall not be considered exhaustive.
30 §402. Notice of copyright : Phonorecords of sound recordings
31 (a) General Requirejlext. — Whenever a sound recording pro-
c;7_'7QC r^
42
40
1 tected under this title is published in the United States or elsewhere by
2 authority of the copyright owner, a notice of copyright as provided
3 by this section shall be placed on all publicly distributed phonorecords
4 of the sound recording.
5 (b) Form of Notice. — The notice appearing on tlie phonorecords
6 shall consist of the following three elements :
7 (1) the symbol ® (the letter P in a circle) ;
8 (2) the year of first publication of the sound recording ;
9 (3) the name of the owner of copyrights in the sound record-
10 ing, or an abbreviation by which the name can be recognized, or a
11 generally known alternative designation of the owner; if the
12 producer of the sound recording is named on the phonorecord
13 labels or containers, and if no other name appears in conjunction
14 with the notice, his name shall be considered a part of the notice.
15 (c) Position of Notice. — The notice shall be placed on the surface
16 of the phonorecord, or on the phonorecord label or container.- in such
17 manner and location as to give reasonable notice of the claim of copy-
18 right.
19 §403. Notice of copyright: Publications incorporating United
20 State Government works
21 Whenever a work is published in copies or phonorecords consisting
22 preponderantly of one or more works of the United States Govern-
23 ment, the notice of copyright provided by section 401 or 402 shall
24 also include a statement identifying, either affirmatively or negatively,
25 those portions of the copies or phonorecords embodying any work or
26 works protected under this title.
27 §404. Notice of copyright: Contributions to collective works
28 (a) A separate contribution to a collective work may bear its own
29 notice of copyright, as provided by section 401 througli 403. How-
30 ever, a single notice applicable to the collective work as a whole is
31 sufficient to satisfy the requirements of sections 401 through 403 with
32 respect to the separate contributions it contains (not including adver-
33 tisements inserted on behalf of persons other than the owner of copy-
34 right in the collective work) , regardless of the ownership of copyright
35 in the contributions and whether or not they have been previously
36 published.
37 (b) Where the person named in a single notice applicable to a
38 collective work as a whole is not the owner of copyright in a separate
39 contribution that does not bear its own notice, the case is governed
40 by the provisions of section 406(a).
43
41
1 § 405. Notice of copyright : Omission of notice
2 (a) Effectt of Omission on Copyright. — The omission of the copy-
3 right notice described by sections 401 through 408 from copies or
4 phonorecords publicly distributed by authority of the copyright
5 owner does not invalidate the copyright in a work if :
6 (1) the notice has been omitted from no more than a relatively
7 small number of copies or phonorecords distributed to the public ;
8 or
9 (2) registration for the work has been made before or is made
10 within five years after the publication without notice, and a
11 reasonable effort is made to add notice to all copies or phono-
12 records that are distributed to the public in the United States
13 after the omission has been discovered; or
14 (3) the notice has been omitted in violation of an express re-
15 quirement in writing that, as a condition of the copyright owner's
16 authorization of the public distribution of copies or phonorecords,
17 they bear the prescribed notice.
18 (b) Effect of Omission on Innocent Infringers. — Any person
19 who innocently infringes a copyright, in reliance upon an authorized
20 copy or phonorecord from which the copyright notice has been
21 omitted, incurs no liability for actual or statutory damages under sec-
22 tion 504 for any infringing acts committed before receiving actual
23 notice that registration for the work has been made under section 408,
^ if he proves that he was misled by the omission of notice. In a suit
25 for infringement in such a case the court may allow or disallow re-
26 covery of any of the infringer's profits attributable to the infringe-
27 ment, and may enjoin the continuation of the infringing undertaking
28 or may require, as a condition for permitting the infringer to con-
29 tinue his undertaking, that he pay the copyright owner a reason-
30 able license fee in an amount and on terms fixed by the court.
31 (c) Removal of Notice. — Protection under this title is not affected
32 by the removal, destruction, or obliteration of the notice, without
33 the authorization of the copyright owner, from any publicly distrib-
34 uted copies or phonorecords.
35 §406. Notice of copyright: Error in name or date
36 (a) Error in Name. — Where the person named in the copyright
37 notice on copies or phonorecords publicly distributed by authority of
38 the copyright owner is not the owner of copyright, the validity and
39 ownership of the copyright are not affected. In such a case, however.
40 any person who innocently begins an undertaking that infringes the
44
42
1 copyright has a complete defense to any action for such infringement
2 if he proves that he was misled by the notice and began the undertak-
3 ing in good faith under a purported transfer or license from the person
4 named therein, unless before the undertaking was begun :
5 (1) registration for the work had been made in the name of
6 the owner of copyright ; or
7 (2) a document executed by the person named in the notice
8 and showing the ownership of the copyright had been recorded.
& The person named in the notice is liable to account to the copyright
10 owner for all receipts from purported transfei'S or licenses made by
11 him under the copyright.
12 (b) Error in Date. — When the year date in the notice on copies or
13 phonorecords distributed by authority of the copyright owner is
14 earlier than the year in which publication first occurred, any period
15 computed from the year of first publication under section 302 is to be
16 computed from the year in the notice. Where the year date is more
17 than one year later than the year in which publication first occurred,
18 the work is considered to have been published without any notice and
19 is governed by the provisions of section 405.
20 (c) Omission of Name or Date. — Where copies or phonorecords
21 publicly distributed by authority of tlie copyright owner contain no
22 name or no date that could reasonably be considered a part of the
23 notice, the work is considered to have been published witliout any
24 notice and is governed by the provisions of section 405.
25 § 407. Deposit of copies or phonorecords for Library of Congress
26 (a) Except as provided by subsection (c), the owner of copyright
27 or of the exclusive right of publication in a work published with no-
28 tice of copyright in the United States shall deposit, within three
29 months after the date of such publication :
30 ( 1 ) two complete copies of the best edition ; or
31 (2) if the work is a sound recording, two complete phono-
32 i-ecords of the best edition, together with any printed or other
33 visually perceptible material published with such phonorecords.
34 This deposit is not a condition of copyright protection.
35 (b) The required copies or phonorecords shall be deposited in tlie
36 Copyright Office for the use or disposition of the Library of Congress.
37 Tlie Register of Copyrights shall, when requested by the depositor
38 and upon payment of the fee prescribed by section 708, issue a receipt
39 for the deposit.
40 (c) The Eegister of Copyrights may by regulation exempt any
45
43
1 categories of material from the deposit requirements of this section,
2 or require deposit of only one copy or phonorecord with respect to
3 any categories.
4 (d) At any time after publication of a work as provided by sub-
5 section (a), the Register of Copyrights may make written demand
6 for the required deposit on any of the persons obligated to make the
7 deposit under subsection (a). Unless deposit is made within three
8 months after the demand is received, the person or persons on whom
9 the demand was made are liable :
10 (1) toafineof not more than $250 for each work; and
11 (2) to pay to the Library of Congress the total retail price of
12 the copies or phonorecords demanded, or, if no retail price has
13 been fixed, the reasonable cost to the Library of Congress of
14 acquiring them.
15 § 408. Copyright registration in general
16 (a) Registration^ Permissive. — At any time during the subsistence
17 of copyright in any published or unpublished work, the owner of
18 copyright or of any exclusive right in the work may obtain registration
19 of the copyright claim by delivering to the Copyright Office the deposit
20 specified by this section, together with the application and fee specified
21 by sections 409 and 708. Subject to the provisions of section 405(a),
22 such registration is not a condition of copyright protection.
23 (b) Deposit for Copyright Registration. — Except as provided by
24 subsection (c), the material deposited for registration shall include:
25 (1) in the case of an impublished work, one complete copy or
26 phonorecord ;
27 (2) in the case of a published work, two complete copies or
28 phonorecords of the best edition ;
29 (3) in the case of a work first published abroad, one complete
30 copy or phonorecord as so published ;
31 (4) in the case of a contribution to a collective work, one com-
32 plete copy or phonorecord of the best edition of the collective
33 work.
34 Copies or phonorecords deposited for the Library of Congress imder
35 section 407 may be used to satisfy the deposit provisions of this section,
36 if they are accompanied by the prescribed application and fee, and by
37 any additional identifying material that the Register may, by regula-
38 tion, require.
39 (c) Administrative Classification and Optional Deposit. — The
40 Register of Copyrights is authorized to specify by regulation the
46
44
1 administrative classes into which works are to be placed for purposes of
2 deposit and registration, and the nature of the copies or phonorecords
3 to be deposited in tlie various classes specified. The regulations may
4 require or permit, for particular classes, the deposit of identifying
5 material instead of copies or phonorecords, the deposit of only one copy
6 or phonorecord where two would normally be required, or a single
7 registration for a group of related works. This administrative classi-
8 fication of works has no significance with resj^ect to the subject matter
9 of copyright or the exclusive rights provided by this title.
10 (d) Corrections and Amplifications. — The Register may also
11 establisih, by regulation, formal procedures for the filing of an applica-
12 tion for supplementary registration, to corre^^t an error in a copyrig'ht
13 registration or to amplify the information given in a registration. Such
14 application shall be accompanied by the fee provided by section 708,
15 and shall clearly identify the registration to be corrected or amplified.
16 The information contained in a supplementary registration augments
17 but does not supersede that contained in the earlier registration.
18 (e) Published Edition of Previously Registered Work. — ^Reg-
19 istration for the first published edition of a work previously registered
20 in unpublished form may be made even though the work as published is
21 substantially the same as the unpublished version.
22 § 409. Application for registration
23 The application for copyright registration shall be made on a form
24 prescribed by the Register of Copyrights and shall include :
25 ( 1 ) the name and address of the copyright claimant ;
26 (2) in the case of a work other than an anonymous or pseudony-
27 mous work, the name and nationality or domicile of the author or
28 authors and, if one or more of the authors is dead, the dates of
29 their deaths;
30 (3) if the work is anonymous or pseudonymous, the nationality
31 or domicile of the author or authors ;
32 (4) in the case of a work made for liire, a statement to this
33 effect;
34 (5) if the copyright claimant is not the author, a brief state-
35 ment of how the claimant obtained ownership of the copyright ;
36 (6) the title of the work, together with any previous or alterna-
37 tive titles under which the work can be identified ;
38 (7) the year in which creation of t lie work was completed ;
39 (8) if the work has been published, the date and nation of its
40 first publication ;
47
45
1 (9) in the case of a compilation or derivative work, an identi-
2 fication of any pre-existing work or works that it is based on or
3 incorporates, and a brief, general statement of the additional
4: material covered by the copyright claim being registered;
5 (10) in the case of a published work containing material of
6 which copies are required by section 601 to be manufactured in
7 the United States, the names of the persons or organizations
8 who performed the processes specified by subsection (c) of sec-
9 tion 601 with respect to that material, and the places where those
10 processes were performed ; and
11 (11) any other information regarded by the Register of Copy-
12 rights as bearing upon the preparation or identification of the
13 work or the existence, ownership, or duration of the copyright.
14 § 410. Registration of claim and issuance of certificate
15 (a) Wlien, after examination, the Register of Copyrights deter-
16 mines that, in accordance with the provisions of this title, the material
17 deposited constitutes copyrightable subject matter and that the other
18 legal and formal requirements of this title have been met, he shall reg-
19 ister the claim and issue to the applicant a certificate of registration
20 under the seal of the Copyright Office. The certificate shall contain
21 the information given in the application, together with the number
22 and effective date of the registration.
23 (b) In any case in which the Register of Copyrights determines
24 that, in accordance with the provisions of this title, the material de-
25 posited does not constitute copyrightable subject matter or that the
26 claim is invalid for any other reason, he sail refuse registration and
27 shall notify the applicant in writing of the reasons for his action.
28 (c) In any judicial proceedings the certificate of a registration made
29 before or within five years after first publication of the work shall
30 constitute prima facie evidence of the validity of the copyright and
31 of the facts stated in the certificate. The evidentiary weight to be
32 accorded the certificate of a registration made thereafter shall be
33 within the discretion of the court.
34 (d) The effective date of a copyright registration is the day on
35 which an application, deposit, and fee, which are later determined by
36 the Register of Copyrights or by a court of competent jurisdiction to
37 be acceptable for registrtion, have all been received in the Copyright
38 Office.
48
46
1 § 411. Registration as pierequisite to infringement suit
2 (a) Subject to the provisions of subsection (b), no action for in-
3 fringement of the copyright in any work shall be instituted until
4 registration of the copyright claim has been made in accordance with
5 this title. In any case, however, where the deposit, application, and fee
6 required for registration have been delivered to the Copyright Office
7 in proper form and registration has been refused, the applicant is
8 entitled to institute an action for infringement if notice thereof, with
9 a copy of the complaint, is served on the Register of Copyrights. The
10 Register may, at his option, become a party to the action with respect
11 to the issue of registrability of the copyright claim by entering his
12 appearance within sixty days after such service, but his failure to do
13 so shall not deprive the court of jurisdiction to determine that issue.
14 (b) In the case of a work consisting of sounds, images, or both, the
15 first fixation of which is made simultaneously with its transmission,
16 the copyright owner may either before or after such fixation takes
17 place, institute an action for infringement under section 501, fully
18 subject to the remedies provided by sections 502 through 506, if. in
19 accordance with requirements that the Register of Copyrights shall
20 prescribe by regulation, the copyright owner —
21 (1) serves notice upon the infringer, not less than ten or more
22 than thirty days before such fixation, identifying the work and
23 the specific time and source of its first transmission, and declar-
24 ing an intention to secure copyright in the work ; and
25 (2) makes registration for the work within three months after
26 its first transmission.
27 § 412. Registration as prerequisite to certain remedies for
28 infringement
29 In any action under this title, other than an action instituted under
30 section 411 (b) , no award of statutory damages or of attoinoj-'s fees, as
31 provided by sections 504 and 505, shall be made for :
32 (1) anj' infringement of copyright in an unpublished work
33 commenced before the effective date of its registration; or
34 (2) any infringement of copyright commenced after first pub-
35 lication of the work and before the effective date of its registra-
36 tion, unless such registration is made within three months after
37 its first publication.
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47
1 Chapter 5.— COPYRIGHT INFRINGEMENT AND REMEDIES
Sec.
501. Infringement of copyright.
502. Remedies for infringement : Injunctions.
503. Remedies for infringement : Impounding and disposition of infringing
articles.
504. Remedies for infringement : Damages and profits.
505. Remedies for infringement : Costs and attorney's fees.
506. Criminal offenses.
507. Limitations on actions.
508. Notification of filing and determination of actions.
2 § 501. Infringement of copyright
3 (a) Anyone who violates any of the exclusive rights of the copy-
4 right owner as provided by sections 106 through 117, or who imports
5 copies or phonorecords into the United States in violation of section
6 602, is an infringer of the copyright.
7 (b) The legal or beneficial owner of an exclusive right under a
8 cojiyright is entitled, subject to the requirements of sections 205(d)
9 and 411, to institute an action for any infringement of that particular
10 right committed while he is the owner of it. The court may require
11 him to serve written notice of the action with a copy of the complaint
12 upon any person shown, by the records of the Copyright Office or
13 otherwise, to have or claim an interest in the copyright, and shall re-
14 quire that such notice be served upon any person whose interest is
15 likely to be affected by a decision in the case. The court may require
16 the joinder, and shall permit the intervention, of any person having
17 or claiming an interest in the copyright.
18 (c) For any secondary transmission by a cable system that em-
19 bodies a performance or a display of a work which is actionable as an
20 act of infringement under subsection (c) of section 111, a television
21 broadcast station holding a copyright or other license to transmit or
22 j)erf orm the same version of that work shall, for purposes of subsection
23 (b) of this section, be treated as a legal or beneficial owner if such
24 secondary transmission occurs within the local service area of that
25 television station.
26 § 502. Remedies for infringement: Injunctions
27 (a) Any court having jurisdiction of a civil action arising under
28 this title may, subject to the provisions of section 1498 of title 28,
29 grant temporary and final injunctions on such terms as it may deem
30 reasonable to prevent or restrain infringement of a copyright.
31 (b) Any such injunction may be served anywhere in the United
32 States on the person enjoined; it shall be operative throughout the
33 United States and shall be enforceable, by proceedings in contempt or
34 otherwise, by any United States court having jurisdiction of that per-
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48
1 son. The clerk of the court granting the injunction shall, when re-
2 quested by any other court in which enforcement of the injunction is
3 sought, transmit promptly to the other court a certified copy of all
4 the papers in the case on file in his office.
'5 § 503. Remedies for infringement : Impounding and disposition of
6 infringing articles
7 (a) At any time while an action under this title is pending, the court
8 may order the impounding, on such terms as it may deem reasonable,
9 of all copies or phonorecords claimed to have been made or used in vio-
10 lation of the copyright owner's exclusive rights, and of all plates,
11 molds, matrices, masters, tapes, film negatives, or other articles by
12 means of which such copies or phonorecords may be reproduced.
13 (b) As part of a final judgment or decree, the court may order the
14 destruction or other reasonable disposition of all copies or phonorec-
15 ords found to have been made or used in violation of the copyright
16 owner's exclusive rights, and of all plates, molds, matrices, masters,
17 tapes, film negatives, or other articles by means of which such copies
18 or phonorecords may be reproduced.
19 § 504. Remedies for infringement : Damages and profits
20 (a) In General. — Except as otherwise provided by this title, an in-
21 f ringer of copyright is liable for either :
22 (1) the copyright owner's actual damages and any additional
23 profits of the infringer, as provided by subsection (b) ; or
24 (2) statutory damages, as provided by subsection (c).
25 (b) Actual Damages and Profits. — The copyright owner is en-
26 titled to recover the actual damages suffered by him as a result of the
27 infringement, and any profits of the infringer that are attributable to
28 the infringement and are not taken into account in computing the
29 actual damages. In establishing the infringer's profits, the copyright
30 owner is required to present proof only of the infringer's gross revenue,
31 and the infringer is required to prove his deductible expenses and the
32 elements of profit attributable to factors other than the copyrighted
33 work.
34 (c) Statutory Damages.—
35 (1) Except as provided by clause (2) of this subsection, the
36 copyright owner may elect, at any time before final judgment is
37 rendered, to recover, instead of actual damages and profits, an
38 award of statutory damages for all infringements involved in
39 the action, with respect to any one work, for winch any one
40 infringer is liable individually, or for which any two or more
51
49
1 infrinjjers are liable jointly and severally, in a sum of not less
2 than $250 or more tlian $10,000 as the court considers just. For
3 the purposes of this subsection, all the parts of a compilation or
4 derivati\-e Avoi'k constitute one work.
5 (2) Tn a case where the copyright owner sustains the burden
6 of provin<r, and the court finds, that infrin<rement was committed
7 willfully, tlie court in its discretion may increase the award of
8 statutory damages to a smn of not more than $50,000. In a case
9 where the infringer sustains the burden of proving, and the court
10 finds, that he was not aware and had no reason to believe that his
11 acts constituted an infringement of copyright, the court in its
12 discretion may reduce tlie award of statutory damages to a sum
13 of not less than $100. In a case where an instructor, librarian or
14 archivist in a nonprofit educational institution, library, or ar-
15 chives, who infringed by reproducing a copyrighted work in copies
16 or phonorecords, sustains the burden of proA'ing that he believed
17 and had reasonable grounds for believing that the reproduction
18 was a fair use under section 107, the court in its discretion may
19 remit statutory damages in whole or in part.
20 § 505. Remedies for infringement: Costs and attorney's fees
21 In any civil action under tjiis title, the court in its discretion may
22 allow the recovery of full costs by or against any party other than
23 the United States or an officer thereof. Except as otherwise provided
24 by this title, the court may also award a reasonable attorney's fee to
25 the prevailing party as part of the costs.
26 § 506. Criminal offenses
27 (a) Criiminai. Infringement. — Any person who infringes a
28 copyright willfully and for purposes of commercial advantage or pri-
29 vate financial gain shall be fined not more than $2,500 or imprisoned
30 not more than one year, or both, for the first such offense, and shall
31 be fined not more than $10,000 or imprisoned not more than three
32 years, or both, for any subsequent oft'ense, provided however, that any
33 person wlio infringes willfully and for purposes of commercial advan-
34 tage or private financial gain the copyright in a sound recording
35 afforded by subsections (1) and (3) in section 106 or the copyright in
36 a motion picture afforded by subsections (1), (3), and (4) in section
37 106 shall be fined not more than $25,000 or imprisoned for not more
38 than one year, or both, for the first such offense and shall be fined
39 not more than $50,000 or imprisoned not more than two years, or
40 both, for any subsequent offense.
52
50
1 (h) Fraudulent Copyrioht Notice. — Any person who, with fraud-
2 nlent intent, places on any article a notice of copyright or words of
3 the same purport that he knows to be false, or who, with fraudulent
4 intent, publicly distributes or imports for public distribution any
5 article bearing such notice or words that he knows to be false, shall be
6 fined not more than $2,500.
7 (c) Frauoulext Removal of CopYr.iciiT Notice. — Any person who,
8 with fraudulent intent, removes or alters any notice of copyright
9 appearing on a copy of a copyrighted work shall be fined not more
10 than $2,500.
11 (d) False Representation. — Any person who knowingly makes a
12 false representation of a material fact in the application for copyright
13 registration provided for by secton 409, or in any written statement
14 filed in connection with the application, shall be fined not more than
15 $2,500.
16 § 507. Limitations on actions
17 (a) Criminal Proceedings.— No criminal proceeding shall be main-
18 tained under the provisions of this title unless it is commenced within
19 three years after the cause of action ai'ose.
20 (b) Civil Actions. — No civil action shall be maintained under the
21 provisions of this title unless it is commenced within three years after
22 the claim accrued.
23 § 508. Notification of filing and determination of actions
24 (a) Within one month softer the filing of any action under this title,
25 the clerks of the courts of the United States shall send written notifica-
26 tion to the Register of Copyrights setting forth, as far as is shown
27 by the papers filed in the court, the names and addresses of the parties
28 and the title, author, and registration number of each work involved
29 in the action. If ajiy other copyrighted work is later included in the
30 action by amendment, answer, or other pleading, the clerk shall also
31 send a notification concerning it to tlie Register within one month
32 after the pleading is filed.
33 (b) Within one month after any final order or judgment is issued
34 in tlie case, the clerk of the court shall notify the Register of it,
35 sending him a copy of the order or judgment together with the written
36 opinion, if any, of the court.
37 (c) Upon receiving the notifications specified in this section, the
38 Registei' shall make them a part of the public records of the Copyright
39 Office.
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51
1 Chapter 6.— MANUFACTURING REQUIREMENT AND
2 IMPORTATION
Sec.
601. Manufacture, importation, and public distribution of certain copies.
602. Infringing importation of copie.s or phonorecord.s.
603. Importation prohibitions : Enforcement and disposition of excluded articlea
3 § 601. Manufacture, importation, and public distribution of cer-
4 tain copies
5 (a) Except as provided by subsection (b), the importation into or
6 public distribution in the United States of copies of a work consisting
7 preponderantly of nondramatic literary material that is in the English
8 language and is protected under this title is prohibited unless the
9 i^ortions consisting of such material have been manufactured in the
10 United States or Canada.
11 ( b ) The provisions of subsection ( a ) do not apply :
12 (1) where, on the date when importation is sought or public
13 distribution in the United States is made, the author of any sub-
14 stantial part of such material is neither a national nor a domicil-
15 iary of the United States or, if he is a national of the United
16 States, has been domiciled outside of the United States for a
17 continuous period of at least one year immediately preceding that
18 date ; in the case of work made for hire, the exemption provided
19 by this clause does not apply unless a substantial part of the work
20 was prepared for an employer or other person who is not a na-
21 tional or domiciliary of the United States or a domestic corpora-
22 tion or enterprise ;
23 (2) where the Bureau of Customs is presented with an import
24 statement issued under the seal of the Copyright Office, in which
25 case a total of no more than two thousand copies of any one such
26 work shall be allowed entry ; the import statement shall be issued
27 upon request to the copyright owner or to a person designated by
28 bim at the time of registration for the work under section 408
29 or at any time thereafter ;
30 (3) where importation is sought under the authority or for the
31 use, other than in schools, of the government of the United States
32 or of any State or political subdivision of a State ;
33 (4) where importation, for use and not for sale, is sought:
34 (A) by any person with respect to no more than one copy
35 of any one work at any one time ;
36 (B) by any person arriving from abroad, with respect to
37 copies forming part of his personal baggage ; or
54
52
1 (C) by an organization operated for scholarly, educa-
2 tional, or religious purposes and not for private gain, with
3 respect to copies intended to form a part of its library ;
4 (5) where the copies are reproduced in raised characters for
5 the use of the blind ;
6 (6) where, in addition to copies imported under clauses (3)
7 and (4) of this subsection, no more than two thousand copies of
8 any one such work, which have not been manufactured in the
9 United States or Canada, are publicly distributed in the United
10 States.
11 (c) The requirement of this section that copies be manufactured in
12 the United States or Canada is satisfied if :
13 (1) in the case where the copies are printed directly from type
14 that has been set, or directly from plates made from such type,
15 the setting of the type and the making of the plates have been
16 performed in the United States or Canada ; or
17 (2) in the case where the making of plates by a lithographic
18 or photoengraving process is a final or intermediate step preceding
19 the printing of the copies, the making of the plates has been per-
20 formed in the United States or Canada ; and
21 (3) in any case, the printing or other final process of producing
22 multiple copies and any binding of the copies have been performed
23 in the United States or Canada.
24 (d) Importation or public distribution of copies in violation of
25 this section does not invalidate protection for a work under this title.
26 However, in any civil action or criminal proceeding for infringement
27 of the exclusive rights to reproduce and distribute copies of the work,
28 the infringer has a complete defense with respect to all of the non-
29 dramatic literary material comprised in the work and any other parts
30 of the work in which the exclusive rights to reproduce and distribute
31 copies are owned by the same person who owns such exclusive rights
32 in the nondramatic literary material, if he proves :
33 (1) that copies of the work have been im^wrted into or publicly
34 distributed in the United States in violation of this section by or
35 with the authority of the owner of such exclusive rights ; and
36 (2) that the infringing copies were manufactured in the United
37 States or Canada in accordance with the provisions of subsection
38 (c) ; and
39 (3) that the infringement was commenced before the effective
55
53
1 date of registration for an authorized edition of the work, the
2 copies of which have been manufactured in the United States or
3 Canada in accordance with the provisions of subsection (c).
4 (e) In any action for infringement of the exclusive rights to repro-
5 duce and distribute copies of a work containing material required by
6 this section to be manufactured in the United States or Canada, the
7 copyright owner shall set forth in the complaint the names of the per-
8 sons or organizations who performed the processes specified by subsec-
9 tion (c) with respect to that material, and the places where those
10 processes were performed.
11 § 602. Infringing importation of copies or phonorecords
12 (a) Importation into the United States, without the authority of
13 the owner of copyright under this title, of copies or phonorecords of
14 a work that have been acquired albroad is an infringement of the
15 exclusive right to distribute copies or phonorecords under section 106,
16 actionable under section 501. This subsection does not apply to :
17 (1) importation of copies or phonorecords under the authority
18 or for the use of the government of the United States or of any
19 State or political subdivision of a State but not including copies
20 or phonorecords for use in schools, or copies of any audiovisual
21 work imported for purposes other than archival use ;
22 (2) importation, for the private use of the importer and not
23 for distribution, by any person with respect to no more than one
24 copy or phonorecord of any one work at any one time, or by any
25 person arriving from abroad with respect to copies or phono-
26 records forming part of his personal baggage; or
27 (3) importation by or for an organization operated for schol-
28 arly, educational, or religious purposes and not for private gain,
29 with respect to no more than one copy of an audiovisual work
30 solely for its archival purposes, and no more than five copies or
31 phonorecords of any other work for its library lending or archival
32 purposes.
33 (b) In a case where the making of tlie copies or phonorecords would
34 have constituted an infringement of copyright if this title had been
35 applicable, their importation is prohibited. In a case where the copies
36 or phonorecords were lawfully made, the Bureau of Customs has no
37 authority to prevent their importation unless the provisions of section
38 601 are applicable. In either case, the Secretary of tlic Treasury is
39 authorized to prescribe, by regulation, a procedure under which any
56
54
1 person claiming an interest in the copyright in a particular work may,
2 upon payment of a specified fee. be entitled to notification by the
3 Bureau of the importation of articles that appear to be copies or
4 phonorecords of the work.
5 §603. Importation prohibitions: Enforcement and disposition of
6 excluded articles
7 (a) The Secretary of the Treasui'V and the United States Postal
8 Service shall separately or jointly make regulations for the enforce-
9 ment of the provisions of this title prohibiting importation.
10 (b) These regulations may require, as a condition for the exclusion
11 of articles under section 602 :
12 (1) that the person seeking exclusioii obtain a court order
13 enjoining importation of the articles; or
14 (2) that he furnish proof, of a specified nature and in accoid-
15 ance with prescribed procedures, that the copyright in which he
16 claims an interest is valid and that the importation would violate
17 the prohibition in section 602 ; he may also be required to post a
18 surety bond for any injury that may result if the detention or
19 exclusion of the articles proves to be unjustified.
20 (c) Articles imported in violation of the importation prohibitions
21 of this title are subject to seizure and forfeiture in the same manner
22 as property imported in violation of the customs revenue laws. For-
23 feited articles shall be destroyed as directed by the Secretary of the
24 Treasury or tlie court, as the case may be : howevei-, the articles may be
25 returned to the countiy of export whenever it is shown to the satisfac-
26 tion of the Secretary of the Treasury that the importer had no reasftn-
27 able grounds for believing that his acts constituted a violation of law.
28 Chapter 7.— COPYRIGHT OFFICE
Sec.
701. The Copyright Office : General responsibilities and organization.
702. Copyright Office regulations.
703. Effective date of actions in Copyright Office.
704. Retention and disposition of articles deposited in Copyright Office.
705. Copyright Office records: Preparation, maintenance, public inspection, and
searching.
706. Copies of Copyright Office records.
707. Copyright Office forms and publications.
708. Copyriglit Off.ce fees.
709. Delay in delivery caused by disruption of jiostal or other services.
29 §701. The Copyright Office: General responsibilities and organi-
30 zation
31 (a) All administrative functions and duties under this title, ex-
32 cept as otherwise specified, are the responsibility of the Register of
33 Copyrights as director of the Copyright Office in the Library of Con-
57
55
1 gress. The Register of Copyrights, together with the subordinate
2 officers and employees of the Copyright Office, sliall be appointed by
3 the Librarian of Congress, and shall act under his general direction
4: and supervision.
5 (b) The Register of Copyrights shall adopt a seal to be used on
6 and after January 1, 1977, to authenticate all certified documents
7 issued by the Copyright Office.
8 (c) The Register of Copyrights shall make an annual report to
9 the Librarian of Congress of the work and accomplishments of the
10 Copyright Office during the previous fiscal year. The annual report
11 of the Register of Copyrights shall be published separately and as
12 a part of the annual report of the Librarian of Congress.
13 § 702. Copyright Office regulations
14 The Register of Copyrights is authorized to establish regulations
15 not inconsistent with law for the administration of the functions and
16 duties made his responsibility under this title. All regulations estab-
17 lished by the Register under this title are subject to the approval of
18 the Librarian of Congress.
19 §703. EfiFective date of actions in Copyright Office
20 In any case in which time limits are prescribed under this title
21 for the performance of an action in the Copyright Office, and in
22 which the last day of the prescribed period falls on a Saturday, Sun-
23 day, holiday or other non-business day within the District of Colum-
24 bia or the Federal Grovernment, the action may be taken on the next
25 succeeding business day, and is effective as of the date when the
26 period expired.
27 § 704. Retention and disposition of articles deposited in Copyright
28 Office
29 (a) Upon their deposit in the Copyright Office under sections 407
30 and 408, all copies, phonorecords, and identifying material, including
31 those deposited in connection with claims that have been refused
32 registration, are tlie property of the United States Government.
33 (b) In the case of published works, all copies, phonorecords. and
34 identifying material deposited are available to the Library of Con-
35 gress for its collections, or for exchange or transfer to any other
36 library. In the case of unpublished works, the Library is entitled to
37 select any deposits for its collections.
38 (c) Deposits not selected by the Library under subsection (b), or
39 identifying portions or reproductions of them, shall be retained under
40 the control of the Copyright Office, including rentention in Go\crn-
57-786 O - 76 - pt. 1 - 5
58
56
1 ment storage facilities, for the longest period considered practicable
2 and desirable by the Register of Copyrights and the Librarian of
3 Congress. After that period it is within the joint discretion of the
4 Register and the Librarian to order their destruction or other disposi-
5 tion ; but, in the case of unpublished works, no deposit shall be de-
6 stroyed or otherwise disposed of during its term of copyright.
7 (d) The depositor of copies, phonorecords, or identifying material
8 imder section 408, or the copyright owner of record, may request
9 retention, under the control of the Copyright Office, of one or more
10 of such articles for the full term of copyright in the work. The Regis-
11 ter of Copyright shall prescribe, by regulation, the conditions under
12 which such requests are to be made and granted, and shall fix the
13 fee to be charged under section 708(a) (11) if the request is granted.
14 §705. Copyright Office records: Preparation, maintenance, public
15 inspection, and searching
16 (a) The Register of Copyrights shall provide and keep in the Copy-
17 right Office records of all deposits, registrations, recordations, and
18 other actions taken under this title, and shall prepare indexes of all
19 such records.
20 (b) Such records and indexes, as well as the articles deposited in
21 connection with completed copyright registrations and retained under
22 the control of the Copyright Office, shall be open to public inspection.
23 (c) Upon request and payment of the fee specified by section 708,
24 the Copyright Office shall make a search of its public records, indexes,
25 and deposits, and shall furnish a report of the information they dis-
26 close with respect to any particular deposits, registrations, or recorded
27 documents.
28 § 706. Copies of Copyright Office records
29 (a) Copies may be made of any public records or indexes of the
30 Copyright Office ; additional certificates of copyright registration and
31 copies of any public records or indexes may be furnished upon request
32 and payment of the fees specified by section 708.
33 (b) Copies or reproductions of deposited articles retained under
34 the control of the Copyright Office shall be authorized or furnished
35 only under the conditions specified by the Copyright Office regulations.
36 § 707. Copyright Office forms and publications
37 (a) Catalog of Copyright Entries. — The Register of Copyrights
38 shall compile and publish at periodic intervals catalogs of all copy-
39 right registrations. These catalogs shall be divided into parts in
40 accordance with the various classes of works, and the Register has
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57
1 discretion to determine on the basis of practicability and usefulness,
2 the form and frequency of publication of each particular part.
3 (b) Other Pubi.ications. — The Register shall furnish, free of
4 charge upon request, application forms for copyright registration and
5 general informational material in connection with the functions of the
6 Copyright Office. He also has authority to publish compilations of
7 information, bibliographies, and other material he considers to be
8 of value to the public.
9 (c) Distribution of Publications. — All publications of the Copy-
10 right Office shall be furnished to depository libraries as specified under
11 section 1905 of title 44. United States Code, and, aside from those fur-
12 nished free of charge, shall be offered for sale to the public at prices
13 based on the cost of reproduction and distribution.
14 § 708. Copyright Office fees
15 (a) The following fees shall be paid to the Register of Copyrights:
16 ( 1 ) for the registration of a copyright claim or a supplementary
17 registration under section 408, including the issuance of a certifi-
18 cate of registration, $6 ;
19 (2) for the registration of a claim to renewal of a subsisting
20 copyright in its first term under section 304(a), including the
21 issuance of a certificate of registration, $4;
22 (3) for the issuance of a receipt for a deposit under section
23 407, $2;
24 (4) for the recordation, as provided by section 205, of a transfer
25 of copyright ownership or other document of six pages or less,
26 covering no more than one title, $5 ; for each page over six and
27 for each title over one, 50 cents additional ;
28 (5) for the filing, under section 115(b), of a notice of intention
29 to make phonorecords, $3 ;
30 (6) for the i-ecordation, under section 302(c), of a statement
31 revealing the identity of an author of an anonymous or pseu-
32 donymous work, or for the recordation, under section 302(d) , of a
33 statement relating to the death of an author, $5 for a document of
34 six pages or less, covering no more than one title; for each page
35 over six and for each title over one, 50 cents additional ;
36 (7) for the issuance, under section 601, of an import state-
37 ment, $3;
38 (8) for tlie issuance, under section 706, of an additional certifi-
39 cate of registration, $2 ;
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58
1 (9) for the issuance of any other certification, $3; the Register
2 of Copyri<rhts has discretion, on the 'basis of their cost, to fix the
3 fees for preparing: copies of Copyright Office records, whether
4 they are to be certified or not ;
5 (10) for the making and reporting of a search as provided by
6 section 705. and for any related services, $5 for each hour or frac-
7 tion of an hour consumed ;
8 (11) for any other special services requiring a substantial
9 amount of time or expense, sucli fees as the Register of Copyrights
10 may fix on the basis of the cost of providing the service.
11 (b) The fees prescribed by or under this section are applicable to the
12 United States Government and any of its agencies, employees, or
13 officers, but the Register of Copyrights has discretion to waive the
14 requirement of this subsection in occasional or isolated cases involving
15 relatively sinall amoimts.
16 § 709. Delay in delivery caused by disruption of postal or other
17 services
18 Tn any cas<e in which the Register of Copyright determines, on the
19 basis of such evidence as he may by rejtulation require, that a deposit,
20 application, fee, or any otiier material to be delivered to the Copyright
21 Office by a particular date, would have been received in the Copyright
22 Office in due time except for a general disruption or suspension of
23 [)ostal or other transportation or communications services, the actual
24 receipt of such material in the Copyright Office within one month after
25 the date on which the Register determines that the disruption or sus-
26 pension of such services has terminated, shall be considered timely.
27 Chapter 8.— COPYRIGHT ROYALTY TRIBUNAL
Sec.
SOI. Copyright Royalty Tribunal: Establislunent and purpose.
802. Petitions for the adjustment of roj-alty rates.
803. Membership of the Tribunal.
804. Procedures of the Tribunal.
805. Compensation of members of the Triliunal ; expenses of the Tribunal.
806. Reports to the Congre.ss.
807. Effective date of royalty adjustment.
808. Effective date of royalty distribution.
809. .Judicial renew.
28 § 801. Copyright Royalty Tribunal : Establishment and purpose
29 (a) There is hereby created in tJie Library of Congress a Copyright
30 Royalty Tril)unal.
31 (b) Subject to the piovisions of this chapter, the purpose of the
32 Tribunal shall be: (1) to make determinations concerning the adjust-
33 ment of the copyright royalty rates specified by sections 111 and 11;")
34 so as to assure that such rates are reasonable and in the event that the
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59
1 Tribunal shall determine that the statutory royalty rate, or a rate pre-
2 viously established by tlie Tribunal, or the revenue basis in respect to
3 section 111, does not provide a reasonable royalty fee for the basic
4 service of providing secondary transmissions of the primary broad-
5 cast transmitter or is otherwise unreasonable, the Tribunal may change
6 the royalty rate or the revenue basis on which the royalty fee shall be
7 assessed or both so as to assure reasonable royalty fee; and (2) to de-
8 termine in certain circumstances the distribution of the royalty fees
9 deposited with the Register of Copyrights under sections 111 and 116.
10 § 802, Petitions for the adjustment of royalty rates
11 (a) On July 1. 1977, the Register of Copyrights shall cause to be
12 published in the Federal Register notice of the commencement of pro-
13 ceedings for the review of the royalty rate specified by sections 111
14 and 115.
15 (b) During the calendar year 1981, and in each subsequent fifth
16 calendar year, any owner or user of a copyrighted work whose royalty
17 rates are specified by this title, or by a rate established by the Tri-
18 bunal, may file a petition with the Register of Copyrights declaring
19 that the petitioner requests an adjustment of the rate. The Register
20 shall make a determination as to whether the applicant has a signifi-
21 cant interest in the royalty rate in which an adjustment is requested.
22 If the Register determines that the petitioner has a significant interest,
23 he shall cause notice of his decision to be published in the Federal
24 Register.
25 § 803. Membership of the Tribunal
26 (a) In accordance with Section 802, or upon certifying the existence
27 of a controversy concerning the distribution of royalty fees deposited
28 pursuant to sections 111 and 116. the Register shall request the Amer-
29 loan Arbitration Association or any similar successor organization to
30 furnish a list of three members of said Association. The Register shall
31 commmiicate the names together witli such information as may be
32 appropriate to all parties of interest. And such party witliin twenty
33 days from the date said communication is sent may submit to the Regis-
34 ter written objections to any or all of the proposed names. If no such
35 objections are leceived. oi- if tlie Registei' determines that said objec-
36 tions are not well founded, he shall certify the appointment of the three
37 designated individuals to constitute a panel of the Tribunal for the
38 consideration of the specified rate or royalty distribution. Such panel
39 shall function as the Tribunal established in section 801. If the Register
40 determines that the objections to the designation of one or more of the
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60
1 proposed individuals are well founded, the Register shall request the
2 American Arbitration Association or any similar successor organiza-
3 tion to propose the necessary number of substitute individuals. Upon
4 receiving such additional names the Register shall constitute the panel.
5 The Register shall designate one member of the panel as Chairman.
6 (b) If any member of a panel becomes unable to perform his duties,
7 the Register, after consultation with the parties, may provide for the
8 selection of a successor in the manner prescribed in subsection (a).
9 § 804. Procedures of the Tribunal
10 (a) The Tribunal shall fix a time and place for its proceedings and
11 shall cause notice to be given to the parties.
12 (b) Any organization or person entitled to participate in the pro-
13 ceedings may appear directly or be represented by counsel.
14 (c) Except as otherwise provided by law, the Tribunal shall deter-
15 mine its own procedure. For the purpose of carrying out the provisions
16 of this chapter, the Tribunal may hold hearings, administer oaths,
17 and require, by subpoena or otherwise, the attendance and testimony
18 of witnesses and the production of documents.
19 (d) Every final decision of the Tribunal shall be in writing and
20 shall state the reasons therefor.
21 (e) The Tribunal shall render a final decision in each proceeding
22 within one year from the certification of the panel. Upon a showing
23 of good cause, the Senate Committee on the Judiciary and the House of
24 Representatives Committee on the Judiciary may waive this require-
25 ment in a particular proceeding.
26 § 805. Compensation of members of the Tribunal ; expenses of the
27 Tribunal
28 (a) In j^roceedings for the distribution of royalty fees, the compen-
29 sation of members of the Tribunal and other expenses of the Tribunal
30 shall be deducted prior to the distribution of the funds.
31 (b) In proceedings for the adjustment of royalty rates, there is
32 hereby authorized to be appropriated such sums as may be necessary.
33 (c) The Library of Congress is authorized to fuinish facilities and
34 incidental service to the Tribunal.
35 (d) The Tribunal is authorized to procure temporary and inter-
36 mittent services to the same extent as is authorized by section 3109 of
37 title 5, United States Code.
38 § 806. Reports to the Congress
39 The Tribunal immediately upon making a final determination in
40 any proceeding for adjustment of a statutory royalty shall transmit
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61
1 its decision, together with the reasons therefor, to the Secretary of the
2 Senate and the Clerk of the House of Representatives for reference
3 to the Judiciary Committees of the Senate and the House of
4 Representatives.
5 § 807. Effective date of royalty adjustment
6 (a) Prior to the expiration of the first period of ninety calendar
7 days of continuous session of the Congress, following the transmittal
8 of the report specified in section 806, either House of the Congress may
9 adoiJt a resolution stating in substance that the House does not favor
10 the recommended royalty adjustment, and such adjustment, therefore,
11 shall not become effective.
12 (b) For the purposes of subsection (a) of this section
13 ( 1 ) Continuity of session shall be considered as broken only by
14 an adjournment of the Congress sine die, and
15 (2) In the computation of the ninety-day period there shall be
16 excluded the days on which either House is not in session because
17 of an adjournment of more than three days to a day certain.
18 (c) In the absence of the passage of such a resolution by either
19 House during said ninety-day period, the final determination by the
20 Tribunal of a petition for adjustment shall take effect on the first day
21 f ollow ing ninety calendar days after the expiration of the period speci-
22 fied by subsection (a).
23 (d) The Register of Copyrights shall give notice of such effective
24 date by publication in the Federal Register not less than sixty days
25 before said date.
26 § 808. Effective date of royalty distribution
27 A final determination of the Tribunal concerning the distribution
28 of royalty fees deposited with the Register of Copyrights pursuant to
29 sections 111 and 116 shall become effective thirty days following such
30 determination unless prior to that time an application has been filed
31 pursuant to section 809 to vacate, modify or correct the determination,
32 and notice of such application has been served upon the Register of
33 Copyrights. The Register upon the expiration of thirty days shall dis-
34 tribute such I'oyalty fees not subject to any apjjlication filed pui-suant
35 to section 809.
36 § 809. Judicial review
37 In any of the following cases tlie T'nited States District Court for
38 the Distrirt of Columbia may make an order vacating, modifying or
39 correcting a final determination of the Tribunal concerning the distri-
40 Ijution of royalty fees —
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62
1 (a) Where the determination was procured by corruption, fraud,
2 or undue means.
3 (b) Where there was evident partiality or corruption in any mem-
4 her of the panel.
5 (c) Where any member of the panel was guilty of any misconduct
6 by which the rights of any party have been prejudiced.
7 TRANSITIONAL AND STTPPLEMENTARY PROVISIONS
8 Sec. 102. This title becomes effective on January 1. 1977. except as
9 otherwise provided by section 304(b) of title 17 as amended by this
10 title.
11 Sec. 103. This title does not provide copyright protection for any
12 work that goes into the public domain before January 1, 1977. The
13 exclusive rights, as provided by section 106 of title 17 as amended
14 by this title, to reproduce a work in phonorecords and to distribute
15 phonorecords of the work, do not extend to any nondramatic musical
16 work copyrighted before July 1, 1909.
17 Sec. 104. All proclamations issued by the President under sections
18 1(e) or 9(b) of title 17 as it existed on December 31, 1976, or under
19 previous copyright statutes of the United States shall continue in
20 force until terminated, suspended, or revised by the President.
21 Sec. 105. (a) (1) Section 505 of title 44, United States Code, Sup-
22 plement IV, is amended to read as follows :
23 '*§ 505. Sale of duplicate plates
24 "The Public Printer shall sell, under regulations of the Joint Com-
25 mittee on Printing to persons who may apply, additional or duplicate
26 stereotype or electrotype plates from which a Government publication
27 is printed, at a price not to exceed the cost of composition, the metal,
28 and making to the Government, plus 10 per centum, and tlie full
29 amount of the price shall be paid when the order is filed."
30 (2) The item relating to section 505 in the sectional analysis at the
31 beginning of chapter 5 of title 44, United States Code, is amended to
32 read as follows :
"505. Sale of duplicate plates."
33 (b) Section 2113 of title 44, United States Code, is amended to read
34 as follows :
35 "§ 2113. Limitation on liability
36 "Wlien letters and other intellectual productions (exclusive of
37 patented material, published works under copyright protection, and
38 unpublished works for which copyright registration has been made)
39 come into the custody or possession of the Administrator of General
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63
1 Services, the United States or its agents are not liable for infringe-
2 ment of copyright or analogous rights arising out of use of the mate-
3 rials for display, inspection, research, reproduction, or other purposes."
4 (c) In section 1498(b) of title 28 of the United States Code, the
5 phrase "section 101(b) of title 17" is amended to read "section 504(c)
6 of title 17".
7 (d) Section 543(a) (4) of the Internal Revenue Code of 1954, as
8 amended, is amended by striking out "(other than by reason of sec-
9 tion2or6thereof)".
10 (e) Section 3202(a) of title 39 of the United States Code is
11 amended by striking out clause (5). Section 3206(c) of title 39 of the
12 United States Code is amended by striking out clause (c). Section
13 3206(d) is renumbered (c).
14 (f) In section 6 of the Standard Reference Data Act (section
15 290(e) of title 15 of the United States Code, Supplement IV). sub-
16 section (a) is amended to delete the reference to "section 8" and to
17 substitute therefor the phrase "section 105".
18 Sec. 106. In any case where, before January 1, 1977, a person has
19 lawfully made parts of instruments serving to reproduce mechani-
20 cally a copyrighted work under the compulsory license provisions of
21 section 1(e) of title 17 as it existed on December 31. 1976, he may
22 continue to make and distribute such parts embodying the same me-
23 chanical reproduction without obtaining a new compulsory license
24 under the terms of section 115 of title 17 as amended by this title.
25 However, such parts made on or after January 1, 1977, constitute
26 phonorecords and are otherwise subject to the provisions of said
27 section 115.
28 Sec. 107. In the case of any work in which an ad interim copyright
29 is subsisting or is capable of being secured on December 31, 1976,
30 under section 22 of title 17 as it existed on that date, copyright pro-
31 tection is hereby extended to endure for the term or terms provided
32 by section 304 of title 17 as amended by this title.
33 Sec. 108. The notice provisions of sections 401 through 403 of title
34 17 as amended by this title apply to all copies or phonorecords publicly
35 distributed on or after January 1, 1977. However, in the case of a work
36 published before January 1, 1977, compliance with the notice provi-
37 sions of title 17 either as it existed on December 31, 1976, or as amended
38 by this title, is adequate witli respect to copies publicly distributed
39 after December 31. 1976.
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64
1 Sec. 109. The registration of claims to copyright for which the
2 required deposit, application, and fee were received in the Copyright
3 Office before January 1, 1977, and the recordation of assignments of
4 copyright or other instruments received in the Copyright Office before
5 January 1, 1977, shall be made in accordance with title 17 as it existed
6 on December 31, 1976.
7 Sec. 110. The demand and penalty provisions of section 14 of title 17
8 as it existed on December 31, 1976, apply to any work in which copy-
9 right has been secured by publication with notice of copyright on or
10 before that date, but any deposit and registration made after that date
11 in response to a demand under that section shall be made in accordance
12 with the provisions of title 17 as amended by this title.
13 Sec. 111. Section 2318 of title 18 of the United States Code is
14 amended to read as follows :
15 "§2318. Transportation, sale or receipt of phonograph records
16 bearing forged or counterfeit labels
17 "Whoever knowingly and with fraudulent intent transports, causes
18 to be transported, receives, sells, or offers for sale in interstate or
19 foreign commerce any phonograph record, disk, wire, tape, film, or
20 other article on which sounds are recorded, to which or upon which is
21 stamped, pasted, or affixed any forged or counterfeited label, knowing
22 the label to have been falsely made, forged, or counterfeited shall be
23 fined not more than $25,000 or imprisoned for not more than one
24 year, or both, for the first such offense and shall be fined not more than
25 $50,000 or imprisoned not more than two years or both, for any sub-
26 sequent offense."
27 Sec. 112. All causes of action that arose under title 17 before Jan-
28 nary 1, 1977, sliall be governed by title 17 as it existed when the cause
29 of action arose.
30 Sec. 113. If any provision of title 17, as amended by this title, is
31 declared unconstitutional, the validity of the remainder of the title
32 is not affected.
33 TITLE II— PROTECTION OF ORNAMENTAL DESIGNS
34 OF USEFUL ARTICLES
35 DESIGNS PROTECTED
36 Sec. 201. (a) The author or other proprietor of an original orna-
37 mental design of a useful article may secure the protection provided
38 by this title upon complying with and subject to the provisions hereof.
39 (b) For tlie purposes of this title —
40 (1) J^ "useful article" is an article which in normal use has an
41 intrinsic utilitarian function that is not merely to portray the appear-
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65
1 ance of the article or to convey information. An article which normally
2 is a part of a useful artick shall be deemed to be a useful article.
3 (2) The "design of a useful article", hereinafter referred to as a
4 "design"', consists of those aspects or elements of the article, including
5 its two-dimensional or three-dimensional features of shape and sur-
6 face, which make up the appearance of the article.
7 (3) A design is "ornamental" if it is intended to make the article
8 attractive or distinct in appearance.
9 (4) A design is "original" if it is the independent creation of an
10 author who did not copy it from another source.
11 DESIGNS NOT SUBJECT TO PROTECTION
12 Sec. 202. Protection under this title shall not be available for a
13 design that is —
14 (a) not original;
15 (b) staple or commonplace, such as a standard geometric figure,
16 familiar symbol, emblem, or motif, or other shape, pattern, or con-
17 figuration which has become common, prevalent, or ordinary ;
18 (c) ditferent from a design excluded by subparagraph (b) above
19 only in insignificant details or in elements which are variants com-
20 monly used in the relevant trades ; or
21 (d) dictated solely by a utilitarian function of the article that
22 embodies it ;
23 (e) composed of three-dimensional features of shape and sur-
24 face with respect to men's, women's, and children's apparel, in-
25 eluding undergarments and outerwear.
26 revisions, ADAPTATIONS, AND REARRANGEMENTS
27 Sec. 208. Protection for a design under this title shall be available
28 notwithstanding the employment in the design of subject matter ex-
29 eluded from protection under section 202, if the design is a substantial
30 revision, adaptation, or rearrangement of said subject matter: Pro-
31 vided. That such protection shall be available to a design employing
32 subject matter protected under title I of this Act, or title 35 of the
33 United States Code or this title, only if such protected subject matt«r is
34 employed with the consent of the proprietor thereof. Such protection
35 shall be independent of any subsisting protection in subject matter
36 employed in the design, and shall not be construed as securing any
37 right to subject matter excluded from protection or as extending any
38 subsisting protection.
39 commencement of protection
40 Sec. 204. (a) The protection provided for a design under this title
41 shall commence upon the date when the design is first made public.
68
1 (b) A design is made public when, by the proprietor of the design
2 or with his consent, an existing useful article embodying the design
3 is anywhere publicly exhibited, publicly distributed, or offered for
4 sale or sold to the public.
5 TERM OF PROTECnOX
6 Sec. 205. (a) Subject to the provisions of this title, the protection
7 herein provided for a design shall continue for a term of five years
8 from the date of the commencement of protection as provided in sec-
9 tion 204:(a). but if a proper application for renewal is received by
10 the Administrator during the year prior to the expiration of the five-
11 year term, the protection herein provided shall be extended for an
12 additional period of five years from the date of expiration of the first
13 five years.
14 (b) If the design notice actually applied shows a date earlier than
15 the date of the commencement of protection as provided in section
16 L'U4:(a). protection shall teiminate as though the term had commenced
17 at the earlier date.
18 (c) Where the distinguishing elements of a design are in substan-
19 tially the same form in a number of different useful articles, the
20 design shall be protected as to all such articles when protected as
21 to one of them, but not more than one registration shall be required,
as provided in this title all rights under this title in said design shall
Upon expiration or termination of protection in a particular design
24 terminate, regardless of the number of different articles in which thft
25 design may have been utilized during the term of its protection.
26 THE DESIGN NOTICE
27 Sec. 206. (a) Whenever any design for which protection is sought
28 under this title is made public as provided in section 204(b), the
29 proprietor shall, subject to the provisions of section 207. mark it or
30 have it marked legibly with a design notice consisting of the following
31 three elements :
32 (1) the words "Protected Design", the abbreviation "Prot'd
33 Des." or the letter "D" within a circle thus @ ;
34 (2) the year of the date on which the design was first made
35 public ; and
36 (3) the name of the proprietor, an abbreviation by which the
37 name can be recognized, or a generally accepted alternative desig-
38 nation of the proprietor; any distinctive identification of the
proprietor may be used if it has been approved and recorded by
22
23
39
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67
1 the Administrator before the design marked with such identifica-
2 t ion is made public.
3 After registration the registration number may be used instead of
4 the elements specified in (2) and (3) hereof.
5 (b) The notice shall be so located and applied as to give reasonable
6 notice of design protection while the useful article embodying the
7 design is passing through its normal channels of commerce. This re-
8 quirement may be fulfilled, in the case of sheetlike or strip materials
9 bearing repetitive or continuous designs, by application of the notice
10 to each repetition, or to the margin, selvage, or reverse side of the ma-
ll terial at reasonably frequent intervals, or to tags or labels affixed to
12 the material at such intervals.
13 (c) '\\nien the proprietor of a design has complied with the provi-
14 sions of this section, protection under this title shall not be affected
15 by the removal, destruction, or obliteration by others of the design
16 notice on an article.
lY EFFECT OF OMISSION OF NOTICE
18 Sec. ^OT. The omission of the notice prescribed in section 206 shall
19 not cause loss of the protection or prevent recovery for infringement
20 against any person who, after written notice of the design protection,
21 begins an undertaking leading to infringement: Provided, That such
22 omission shall prevent any recovery imder section 222 against a person
23 who began an undertaking leading to infringement before receiving
24 written notice of the design protection, and no injunction shall be
25 had unless the pi-oprietor of the design shall reimburse said person
26 for any reasonable expenditure or contractual obligation in connection
27 with such undertaking incurred before written notice of design protec-
28 tion, as the court in its discretion shall direct. The burden of proving
29 written notice shall be on the proprietor.
30 INFRINGEMENT
31 Sec. 208. (a) It shall be infringement of a design protected under
32 this title for any person, without the consent of the proprietor of
33 the design, within the United States or its territories or possessions
34 and during the term of such protection, to —
35 (1) make, have made, or import, for sale or for use in trade,
36 any infringing article as defined in subsection (d) hereof; or
37 (2) sell or distribute for sale or for use in trade any such
38 infringing article : Provided, however, That a seller or distributor
39 of any such article who did not make or import the same shall be
40 deemed to be an infringer only if —
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1 (i) he induced or acted in collusion with a manufacturer to
2 make, or an importer to import such article (merely purchas-
3 ing or giving an order to purchase in the ordinary course of
4 business shall not of itself constitute such inducement or
5 collusion) ; or
6 (ii) he refuses or fails upon the request of the proprietor
7 of the design to make a prompt and full disclosure of his
8 source of such article, and he ordei-s or reordei-s such article
9 after having received notice by registered or certified mail
10 of the protection subsisting in the design.
11 (b) It shall be not infringement to make, have made, import, sell,
12 or distribute, any article embodying a design created without knowl-
13 edge of, and copying from, a protected design.
14 (c) A person who incorporates into his own product of manufacture
15 an infringing article acquired from others in the ordinary course of
16 business, or who, without knowledge of the protected design, makes or
17 processes an, infringing article for the account of another person in the
18 ordinary course of business, shall not be deemed an infringer except
19 under the conditions of clauses (i) and (ii) of paragraph (a) (2) of
20 this section. Accepting an order or reorder from the source of the in-
21 fringing article shall be deemed ordering or reordering within the
22 meaning of clause (ii) of paragraph (a) (2) of this section.
23 (d) An "infringing article" as used herein is any article, the design
24r of which has been copied from the protected design, without the con-
25 sent of the proprietor: Provided, however, That an illustration or
26 picture of a protected design in an advertisement, book, periodical,
27 newspaper, photograph, broadcast, motion picture, or similar medium
28 shall not be deemed to be an infringing article. An article is not an
29 infringing article if it embodies, in common with the protected design,
30 only elements described in subsections (a) through (d) of section 202.
31 (e) The party alleging rights in a design in any action or proceed-
32 ing shall have the burden of affirmatively establishing its originality
33 whenever the opposing party introduces an earlier work which is
34 identical to such design, or so similar as to make a prima facie show-
35 ing that such design was copied from such work.
36 APPLICATION FOK REGISTRATION
37 Sec. 209. (a) Protection under this title shall be lost if application
38 for registration of the design is not made within six months after the
39 date on which the design was first made public as provided in section
40 304(b).
71
69
1 (b) Application for registration or renewal may be made by the
2 proprietor of the design.
3 (c) The application for registration shall be made to the Adminis-
4 trator and shall state (1) the name and address of the author or
5 authors of the design; (2) the name and address of the proprietor
6 if different from the author; (3) the specific name of the article, in-
7 dicating its utility ; (4) the date when the design was first made public
8 MS provided in section 204(b) ; and (5) such other information as may
9 be required by the Administrator. The application for registration
10 may include a description setting forth the salient features of the de-
ll sign, but the absence of such a description shall not prevent registra-
12 tion under this title.
13 (d) The application for registration shall be accompanied by a
14 statement under oath by the applicant or his duly authorized agent or
15 representative, setting forth that, to the best of his knowledge and be-
16 lief ( 1 ) the design is original and was created by the author or authors
17 named in the application ; (2) the design has not previously been regis-
18 tered on behalf of the applicant or his predecessor in title; (3) the de-
19 sign has been made public as provided in section 204(b) ; and (4) the
20 applicant is the person entitled to protection and to registration under
21 this title. If the design has been made public with the design notice
22 prescribed in section 206, the statement shall also describe the exact
23 form and position of the design notice.
24 (e) Error in any statement or assertion as to the utility of the article
25 named in the application, the design of which is sought to be regis-
26 tered, shall not affect the protection secured under this title.
27 (f ) Errors in omitting a joint author or in naming an alleged joint
28 author shall not affect the validity of the registration, or the actual
29 ownership or the protection of the design : Provided^ That the name of
30 one individual who was in fact an author is stated in the application.
31 Where the design was made within the regular scope of the author's
32 employment and individual authorship of the design is difficult or im-
33 iK>ssible to ascribe and the application so states, the name and address
34 of the employer for whom the design was made may be stated instead
35 of that of the individual author.
36 (g) The application for registration shall be accompanied by two
37 copies of a drawing or other pictorial representation of the useful
38 article having one or more views, adequate to show the design, in a
39 form and style suitable for reproduction, which shall be deemed a
40 part of the application.
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70
1 (h) Related useful articles having common design features may be
2 included in the same application under such conditions as may be pre-
3 scribed by the Administrator.
4 BENEFIT OF EARLIER FILING DATE IN FOREIGN COUNTRY
5 Sec. 210. An application for registiation of a design filed in this
6 country by any person who has, or whose legal representative or pred-
7 ecessor or successor in title has previously regularly filed an applica-
8 tion for registration of the same design in a foreign country which af-
9 fords similar privileges in the case of applications filed in the United
10 States or to citizens of tlie United States shall have the same effect
11 as if filed in this country on the date on which the application was
12 fii-st filed in any such foreign country, if the application in this country
13 is filed within six months from the earliest date on which any such
14 foreign application was filed.
15 OATHS AND ACKNOWLEDGMENTS
16 Sec. 211. Oaths and acknowledgments required by this title may be
17 made before any person in the United States authorized by law to
18 administer oaths, or, when made in a foreign country, before any
19 diplomatic or consular officer of the United States authorized to ad-
20 minister oaths, or before any official authorized to administer oaths in
21 the foreign country concerned, whose authority shall be proved by a
22 certificate of a diplomatic or consular officer of the United States, and
23 shall be valid if they comply with the laws of the state or country
24 where made.
25 EXAMINATION OF APPLICATION AND ISSUE OR REBTJSAL OF REGISTRATION
26 Sec. 212. (a) Upon the filing of an application for registration in
27 proper form as provided in section 209, and upon payment of the fee
28 provided in section 215, the Administrator shall determine whether
29 or not the application relates to a design which on its face appears to
30 be subject to protection under this title, and if so, he shall register the
31 design. Registration under this subsection shall be announced by
32 publication.
33 (b) If, in his judgment, the application for registration relates to
34 a design which on its face is not subject to protection under this title,
35 the Administrator shall send the applicant a notice of his refusal to
36 register and the grounds therefor. Within three months from the date
37 the notice of refusal is sent, the applicant may request, in writing, re-
38 consideration of his application. After consideration of such a request,
39 the Administrator shall either register the design or send the applicant
40 a notice of his final refusal to register.
73
71
1 (c) Any person who believes he is or will be damaged by a registra-
2 tion under this title may, upon payment of the prescribed fee, apply
3 to the Administrator at any time to cancel the registration on the
4 ground that the design is not subject to protection under the provisions
5 of this title, stating the reasons therefor. Upon receipt of an applica-
6 tion for cancellation, the Administrator shall send the proprietor of
7 the design, as shown in the records of the Office of the Administrator, a
8 notice of said application, and the pix>prietor shall have a period of
9 three months from the date such notice was mailed in which to present
10 arguments in support of the validity of the registration. It shall also
11 be within the authority of the Administrator to establish, by regula-
12 tion, conditions under which the opposing parties may appear and be
13 heard in support of their arguments. If, after the periods provided for
14 the presentation of arguments have expired, the Administrator deter-
15 mines that the ai^plicant for cancellation has established that the de-
16 sign is not subject to protection under the provisions of this title, he
17 shall order the registration stricken from the record. Cancellation
18 under this subsection shall be announced by publication, and notice of
19 the Administrator's final determination with respect to any application
20 for cancellation shall be sent to the applicant and to the proprietor
21 of record.
22 (d) Remedy against a final adverse determination under subpara-
23 graphs (b) and (c) above may be had by means of a civil action
24 against the Administrator pursuant to the provision of section 1361 of
25 title 28, United States Code, if commenced within such time after such
26 decision, not less than 60 days, as the Administrator appoints.
27 (e) When a design has been registered under this section, the lack
28 of utility of any article in which it has been embodied shall be no
29 defense to an infringement action under section 220, and no ground
30 for cancellation under subsection (c) of this section or under sec-
31 tion 223.
32 CERTIFICATION OF REGISTILVHOX
33 Sec. 213. Certificates of registration shall be issued in the name of
34 the United States under the seal of the Office of the Administrator and
35 shall be recorded in the official records of that Office The certificate
36 shall state the name of the useful article, the date of filing of the appli-
37 cation, the date on which the design was first made public as pro\ided
in section 204(b) or any earlier date as set forth in section 205(b), and
shall contain a reproduction of the drawing or other pictorial repre-
38
39
40 sentation showing the design. Where a description of the salient fea-
57-786 O - 76 - pt. 1
74
72
1 tures of the desifrr^ appears in the application, this description shall
2 also appear in the certificate. A renewal certificate sliall contain the
3 date of renewal registration in addition to the foi-egoing. A certificate
4 of initial or renewal registration shall be admitted in any court as
5 prima facie evidence of the facts stated therein.
6 PUBLICATION OF ANNOUNCEMENTS AND INDEXES
7 Sec. 214. (a) The Administrator shall publish lists and indexes of
8 registered designs and cancellations thereof and may also publish the
9 drawing or other pictorial representations of registered designs for
10 sale or other distribution.
11 (b) The Administrator shall establish and maintain a file of the
12 drawings or other pictorial representations of registered designs,
13 which file shall be available for use by the public under such condi-
14; tions as the Administrator may prescribe.
15 FEES
16 Sec. 215. (a) There shall be paid to the Administrator the follow-
17 ing fees :
18 (1) On filing each application for registration or for renewal of
19 registration of a design, $15.
20 (2) For each additional related article included in one application,
21 $10.
22 (3) For recording assignment, $3 for the first six pages, and for
23 each additional two pages or less, $1.
24 (4) For a certificate of correction of an error not the fault of the
25 Office, $10.
26 ( 5 ) For certification of copies or records, $1 .
27 (6) On filing each a^jplication for cancellation of a registration,
28 $15.
29 (b) The Administrator may establish charges for materials or serv-
30 ices furnished by the Office, not specified above, reasonably related to
31 the cost thereof.
32 REGULATIONS
33 Sec. 216. The Administrator may establisli regulations not incon-
34 sistent with law for the administration of this title.
35 COPIES OF RECORDS
36 Sec. 217. Upon payment of the prescribed fee, any person may
37 obtain a certified copy of any official record of the Office of the Admin-
38 istrator, which copy shall be admissible in evidence with the same effect
39 as the original.
75
73
1 CORRECTION OF ERRORS IN CERTIFICATES
2 Sec. -218. The Administratoi' may correct any error in a registration
3 incurred through the fault of the Office, or, upon payment of the re-
4 quired fee, any error of a clerical or typographical nature not the fault
5 of the Office occurring in good faith, by a certificate of correction under
6 seal. Such registration, together with the certificate, shall thereafter
7 have the same effect as if the same had been originally issued in such
8 corrected form.
9 OWNERSHIP AND TRANSFER
10 Sec. 219. (a) The property right in a design subject to protection
11 under this title shall vest in the author, the legal representatives of a
12 deceased author or of one under legal incapacity, the employer for
13 whom the author created the design in the case of a design made
14 within the regular scope of the author's employment, or a person to
15 whom the rights of the author or of such employer have been trans-
16 ferred. Tlie person or persons in whom the property right is vested
17 shall be considered the proprietor of the design.
18 (b) The property right in a registered design, or a design for which
19 an application for registration has been or may be filed, may be as-
20 signed, granted, conveyed, or mortgaged by an instrument in writing,
21 signed by the proprietor, or may be bequeathed by will.
22 (c) An acknowledgement as provided in section 311 shall be prima
23 facie evidence of the execution of an assignment, grant, conveyance,
24 or mortgage.
25 (d) An assignment, grant, conveyance, or mortgage shall be void
26 as against any subsequent purchaser or mortgage for a valuable con-
27 sideration, without notice, unless it is recorded in the Office of the
28 Administrator within three months from its date of execution or prior
29 to the date of such subsequent purchase or mortgage.
30 REMEDY FOR INFRINGEMENT
31 Sec. 220. (a) The proprietor of a design shall have remedy for in-
32 fringement by civil action instituted after issuance of a certificate of
33 registration of the design.
34 (b) The proprietor of a design may have judicial review of a final
35 refusal of the Administrator to register the design, by a civil action
36 brought as for infringement if commenced within the time specified
37 in section 212 (d) , and shall have remedy for infringement by the same
38 action if the court adjudges the design subject to protection under this
39 title: Provided, That (1) lie has previously duly filed and duly pros-
76
74
1 edited to such final refusal an application in proper form for reg^is-
2 tration of the designs, and (2) he causes a copy of the complaint in
3 action to be delivered to the Administrator within ten days after the
4 commencement of the action, and (3) the defendant has committed acts
5 in respect to the design which would constitute infringement with
6 respect to a design protected under this title.
7 INJUNCTION
8 Sec. 221. The several courts having jurisdiction of actions under
9 this title may grant injunctions in accordance with the principles of
10 equity to prevent infringement, including in their discretion, prompt
11 relief by temporary restraining orders and preliminary injunctions.
12 RECOVERY FOR INFRINGEMENT, AND SO FORTH
13 Sec. 222. (a) Upon finding for the claimant the court shall award
14 him damages adequate to compensate for the infringement, but in
15 no event less than the reasonable value the court shall assess them.
16 In either event the court may increase the damages to such amount,
17 not exceeding $5,000 or $1 per copy, whichever is greater, as to the
18 court shall appear to be just. The damages awarded in any of the
19 above circumstances shall constitute compensation and not a penalty.
20 The court may receive expert testimony as an aid to the determination
21 of damages.
22 (b) No recovery under paragraph (a) shall be had for any infringe-
23 ment committed more than three years prior to the filing of the
24 complaint.
25 (c) The court may award reasonable attorney's fees to the prevail-
26 ing party. The court may also award other expenses of suit to a
27 defendant prevailing in an action brought under section 220(b).
28 (d) The court may order that all infringing articles, and any plates,
29 molds, patterns, models, or other means specifically adapted for mak-
30 ing the same be delivered up for destruction or other disposition as
31 the court may direct.
32 POWER OF COURT OVER REGISTRATION
33 Sec. 223. In any action involving a design for which protection is
34 sought under this title, the court when appropriate may order registra-
35 tion of a design or the cancellation of a registration. Any such order
36 shall be certified by the court to the Administrator, who shall make
37 appropriate entry upon the records of his Office.
38 LIABILITY FOR ACTION ON REGISTRATION FRAUDULENTLY OBTAINED
39 Sec 224. Any person who shall bring an action for infringement
40 knowing that registration of the design was obtained by a false or
77
75
1 fraudulent representation materially affecting the rights under this
2 title, shall be liable in the sum of $1,000, or such part thereof as the
3 court may determine, as compensation to the defendant, to be charged
4 against the plaintiff and paid to the defendant, in addition to such
5 costs and attorney's fees of the defendant as may be assessed by the
6 court.
7 PENALTY FOR FALSE MARKING
8 Sec. 225. (a) Whoever, for the purpose of deceiving tlie public,
9 marks upon, or applies to, or uses in advertising in connection with any
10 article made, used, distributed, or sold by him, the design of which
11 is not protected under this title, a design notice as specified in section
12 306 or any other words or symbols importing that the design is pro-
13 tected mider this title, knowing that the design is not so protected,
14 shall be fined not more than $500 for every such offense.
15 (b) Any person may sue for the penalty, in which event, one-half
16 shall go to the person suing and the other to the use of the United
17 States.
\g PENALTY FOR FALSE REPRESENTATION
19 Sec. 226. Whoever knowingly makes a false representation mate-
20 rially affecting the rights obtainable under this title for the purpose
21 of obtaining registration of a design under this title shall be fined
22 not less than $500 and not more than $1,000, and any rights or privi-
23 leges he may have in the design under this title shall be forfeited.
24 RELATION TO COPYRIGHT LAW
25 Sec. 227. (a) Nothing in this title shall affect any right or remedy
26 now or hereafter held by any person under title I of this Act.
27 (b) When a pictorial, graphic, or sculptural work in which copy-
28 right subsists under title I of this Act is utilized in an original oma-
29 mental design of a useful article, by the copyright proprietor or under
30 an express license from him, the design shall be eligible for protection
31 under the provisions of this title.
32 RELATION TO PATENT LAW
33 Sec. 228. (a) Nothing in this title shall affect any right or remedy
34 available to or held by any person under title 35 of the United States
35 Code.
36 (b) The issuance of a design patent for an ornamental design for
37 an article of manufacture under said title 35 shall terminate any pro-
38 tection of the design under this title.
39 COMMON LAW AND OTHER RIGHTS UNAFFECTED
40 Sec. 229. Nothing in this title shall annul or limit (1) common law
41 or other rights or remedies, if any, available to or held by any person
78
76
1 with respect to a design which has not been made public as provided
2 in section 304(b), or (2) any trademark right or right to be protected
3 against unfair competition.
4 ADMINISTRATOR
5 Sec. 230. The Administrator and Office of the Administrator re-
6 ferred to in this title shall be such officer and office as the President
7 may designate.
8 SEVERABILiry CLAUSE
9 Sec. 231. If any provision of this title or the application of such
10 provision to any person or circumstance is held invalid, the remainder
11 of the title or the application to other persons or circumstances shall
12 not be affected thereby.
13 AMENDMENT OF OTHER STATUTES
14 Sec. 232. (a) Subdivision a (2) of section 70 of the Bankruptcy
15 Act of July 1, 1898, as amended (11 U.S.C. 110(a)), is amended
16 by inserting "designs," after "patent rights".
17 ( b ) Title 28 of the United States Code is amended —
18 (1) by inserting "designs," after "patents," in the first sentence
19 of section 1338(a) ;
20 (2) by inserting ", design," after "patent" in the second sen-
21 tence of section 1338 ( a) ;
22 (3) by inserting "design," after "copyright," in section 1338
23 (b) ;
24 (4) by inserting "and registered designs" after "copyrights" in
25 section 1400; and
26 (5) by revising section 1498 (a) to read as follows :
27 "(a) Whenever a registered design or invention is used or manu-
28 factured by or for the United States without license of the owner
29 thereof or lawful right to use or manufacture the same, the owner's
30 remedy shall be by action against the United States in the Court of
31 Claims for the recovery of his reasonable and entire compensation
32 for such use and manufacture.
33 "For the purposes of this section, the use or manufacture of a
34 registered design or an invention described in and covered by a patent
35 of the United States by a contractor, a subcontractor, or any person,
36 firm, or corporation for the Grovernment and with the authorization
37 or consent of the Government, shall be construed as use or manufac-
38 ture for the United States.
39 "The court shall not award compensation under this section if
40 the claim is based on the use or manufacture by or for the United
41 States of any article owned, leased, used by, or in the possession of
79
77
1 the United States, prior to, in the case of an invention, July 1, 1918,
2 and in the case of a registered design, July 1, 1978.
3 "A Government employee shall have the right to bring suit against
4 the Government under this section except where he was in a position
5 to order, influence, or induce use of the registered design or invention
6 by the Government. This section shall not confer a right of action on
7 any registrant or patentee or any assignee of such registrant or pat-
8 entee with respect to any design created by or invention discovered or
9 invented by a person while in the employment or service of the United
10 States, where the design or invention was related to the official func-
11 tions of the employee, in cases in which such functions included
12 reseaiTh and development, or in the making of which Government
13 time, materials, or facilities were used."
14 TIME OF TAKING EFFECT
15 Sec. 233. This title shall take effect one year after enactment of this
16 Act.
17 NO RETROACTIVE EFFECT
18 Sec. 234. Protection under this title shall not be available for any
19 design that has been made public as provided in section 204(b) prior
20 to the effective date of this title.
21 SHORT TIIXE
22 Sec. 235. This title may be cited as ''The Design Protection Act of
23 1975".
80
94tu congress
1st Session
H. R. 5345
IN THE HOUSE OF REPKESENTATIVES
Makcii 21,1975
Mr. Danif.lson introduced the following bill ; which was referred to the Com-
mittee on the Judiciary
To amend the Copyright Act of 1909, and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 fives of the United States of America in Congress assembled,
3 That til is Act may be cited as the "Performance Iliglits
4 Amendment of 1975".
5 Sec. 2. The first section of title 17, United States Code,
6 is amended —
*
7 (1) l)y striking out "and" where it appears at the
8 end of suhsections (c) and (d) ;
9 (2) by striking out the period at the end of sub-
10 section (e) and inserting in lieu thereof a semicolon and
11 "and";
81
2
1 (3) by striking out subsection (f) and inserting in
2 lieu thereof the following :
3 "(f)(1) To perform publicly for profit and to reproduce
4 and distribute to the public by sale or other transfer of owner-
5 ship, or by rental, lease, or lending, any reproduction of a
6 copyrighted work which is a sound recording: Provided,
7 That the exclusive rights of the owner of a copyright in a
8 sound recording to reproduce and perform it are limited to
9 the rights to duplicate the sound recording in a tangible
10 form that directly or indirectly recaptures the actual sounds
11 fixed in the recording, and to perform those actual sounds:
12 Provided further, That these rights do not extend to the
13 making or duplication of another sound recording that is an
14 independent fixation of other sounds, or to the perfomiance
15 of other sounds, even though such sounds imitate or simulate
16 those in the copyrighted sound recording; or to reproduc-
17 tions made by broadcasting organizations exclusively for
18 their own use.
19 " (2) Where the copyrighted sound recording has been
20 distributed to the public under the authority of the copyright
21 owner, the public performance of the sound recording shall
22 be subject to compulsory licensing in accordance with the
23 provisions of section 33 of this title." ; and
24 (4) by inserting immediately before the period at
25 the end of the last sentence of such section (relating to
82
o
O
1 coin-operated machines) a comma and the following:
2 "except that the provisions of this sentence shall not
3 apply to the public performance of a sound recording
4 under subsection (f ) of this section".
5 Sec. 3. (a) Chapter 1 of title 17, United States Code,
6 is amended by adding at the end thereof the following new
7 section:
8 "§33. Compulsory licensing; royalties
9 "(a) The annual royalt}^ fees for the compulsory li-
10 cense provided for in section 1 (f) (2) of this title may,
11 at the user's option, be computed on either a blanket or a
12 prorated basis. x\lthough a negotiated license may be substi-
13 tuted for the compulsory license prescribed by this subsec-
11 tion, in no case shall the negotiated rate amount to less than
15 the following apphcable rate or payment :
16 " (1) For a radio broadcast station hcensed by the
17 Tederal Communications Commission, the royalty rate
18 or payment shall be as follows :
19 "(A) in the case of a broadcast station with
20 gross receipts from its advertising sponsors of more
21 than $25,000 but less than $100,000 a year, the
22 yearly performance royalty payment shall be $250 ;
23 or
24 "(B) in the case of a broadcast station with
25 gross receipts from its advertising sponsors of more
83
4
1 than $100,000 hut less tlian $200,000 a year, the
2 yearly performance royalty payment shall he $750 ;
3 or
4 " (C) in the case of a hroadcast station with
5 gross receipts from its advertising sponsors of more
6 than $200,000 a year, the yearly hlanket rate shall
7 he 1 per centum of the net receipts from the adver-
8 tising sponsors during the applicahle period, and the
9 alternative prorated rate is a fraction of 1 per centum
10 of such net receipts, taking into account the amount
11 of the station's commercial time devoted to play-
12 ing copyrighted sound recordings,
13 "(2) For a television broadcast station licensed hy
14 the Federal Communications Commission, the royalty
15 rate or payment shall be as follows :
16 _ " (A) in the case of a broadcast station with
17 gross receipts from its advertising sponsors of more
18 than $1,000,000 but less than $4,000,000 a year,
19 the yearly performance royalty payment shall be
20 $750 ; or
21 "(B) in the case of a broadcast station with
22 gross receipts from its advertising sponsors of more
23 than $4,000,000 a year, the yearly performance
24 i"oyalty payment shall be $1,500.
25 "(3) For background music services and other
84
5
1 transmitters of performances of sound recordings, the
2 yt^arly blanket rate is 2 per centum of the gross receipts
3 from subscribers or others who pay to receive the trans-
4 mission during the applicable period, and the alternative
5 prorated rate is a fraction of 2 per centum of such gross
6 receipts, taking into account the proportion of time
7 devoted to musical performances by the transmitter dur-
8 ing the applicable period.
9 " (4) For an operator of coin-operated phonorecord
10 players, the yearly performance royalty payment shall
11 be $1 for each phonorecord player.
12 "(5) For all other users not otherwise exempted,
13 the blanket rate is $25 per year for each location at
14 which copyrighted sound recordings are performed,
15 and the alternative prorated rate shall be based on the
1^ number of separate performances of such works during
1''' the year and shall not exceed $5 per day of use.
■^^ " (6) No royalty fees need be paid for a compulsory
19 license for the public performance of copyrighted sound
20 recordings by a radio broadcast station where its annual
21 gross receipts from advertising sponsors were less than
22 $25,000, by a television broadcast station where its an-
23 nual gross receipts from advertising sponsors were less
24 than $1,000,000, or by a background music service or
2^ other transmitter of performances of somid recordings
85
6
1 where its annual gross receipts from subscribers or others
2 who pay to receive the transmission were less than
3 $10,000.
4 "(b) The annual royalty fees provided in subsection (a)
5 shall be applicable until such time as the royalty rate is
6 agreed upon by negotiation between the copyright owner and
7 the hcensee, or their designated representatives: Provided,
8 That the annual royalty fees provided for in subsection (a)
9 shall be applicable for a period of not less than two years
10 following the date of enactment of the Performance Rights
11 Amendment of 1975. In the event that the parties or their
12 representatives are unable to agree upon a royalty rate pur-
13 suant to negotiation, the public performance of the sound
14 recording shall be subject to compulsory licensing at a royalty
15 rate and under terms which shall be set by an arbitration
16 panel composed of three members of the American Arbitra-
17 tion Association, of which one member of the panel shall be
18 selected separately by each of the parties in disagreement,
]^9 and one member shall be selected jointly by the parties in
20 disagreement.
21 "(c) The royalty fees collected pursuant to this section
22 shall be divided equally between the performers of the
23 sound recording and the copyright owners of the sound
24 recording. Neither a performer nor a copyright owner may
25 assign his right to the royalties provided for in this section
86
7
1 to the copyright owner or performer of tlie sound recording,
2 respectively.
3 " (cl) -^s used in this section, the term —
4 "(1) 'performers' means musicians, singers, con-
5 ductors, actors, naiTators, and others whose performance
6 of a liteiary, musical, or dramatic work is embodied in a
7 sound recording ; and
8 " (2) 'net receipts from advertising sponsors' means
9 gross receipts from advertising sponsors less any com-
10 missions paid ])y a broadcast station to advertising
11 agencies.".
12 (b) The analysis of such chapter is amended by add-
13 ing at the end thereof the following new item :
"33. Compulsory licensing; royalties.".
87
94th congress
IsT Session
H. It 4965
IN THE HOUSE OF REPRESENTATIVES
March 14,1975
Mr. Won Pat introduced the following bill ; which was referred to the Com-
mittee on the Judiciary
A BILL
For the amendment of the Copyright Law, title 17 of the
United States Code.
1 Be it enacted by the Senate and House of Representa-
2 fives of the United States of America in Congress assembled,
3 That title 17 of the United States Code, entitled "Copy-
4 rights", is hereby amended by adding new section 101 (f)
5 to read as follows :
6 " (f ) For all the purposes of the provisions of this
7 title deaUng with infringements of copyright, including crimi-
8 nal prosecution pursuant to section 104 of this title, a
9 person shall not infringe or have infringed the copyright in
10 any work protected under the copyright laws of the United
11 States who,
88
2
1 " ( 1 ) f or the pui-pose of transmission on a noncon-
2 tiguous area cable television system, has made or
3 shall cause to be made, or has transmitted or shall
4 cause to be transmitted, a videotape of a television pro-
5 gram or programs broadcast by one or more television
6 stations hcensed by the Federal Conomunications
7 Commission; and when after the enactment of this
8 subsection :
9 " (i) the videotape is transmitted no more
10 than one time, without deletion of any material
11 including commercials, on any such system; and
12 " (ii) an owner or oflScer of such facility erases
13 or destroys, or causes the erasure or destruction of
1^ such videotape; and
1''^ " (iii) subject to the provisions of subparagraph
^C (2) of this subsection, on or before the end of each
l'^ calendar quarter, an owner or officer of such system
18 executes an aflSdavit attesting to the erasure or
19 destruction of all such videotapes made or used dur-
20 ing the 'preceding quarter; and
21 "(iv) said owner or officer places or causes said
22 affidavit, or the affidavit received pursuant to section
23 101 (f) (2) (ii) of this title, to be placed in a file,
24 open to public inspection, at such system's main
25 oflSce in the community where the transmission is
89
3
;j' made or in the nearest community where such sys-
2 ' tern maintains an office.
3- *'(2) Nothing herein shall prevent any such system,
4 pursuant to written contract, from transferring the video-
5 tapes to another such system provided that:
•6 " (i) said Vv-ritten contract is placed in the file,
7 open to public inspection, required hereunder; and
Q- " (ii) the last such facility transmitting the pro-
9 grams shall comply with the provisions of section
10 101 (f) (1) (ii) through (iv) of this title, and shall
11 " (iii) provide a copy of the affidavit required
12r hereunder to each such system making a previous
13 'transmission of the same \ideotape.
14 " (3) As used in this subsection, the following terms
15 and their variant forms mean the following:
16 "(i) a 'transmission' is the distribution by a
17 noncontiguous area cable television system of a
18 videotape to its subscribers and is the equivalent of
19 the carriage of broadcast signals for all the purposes
20 of the rules and regulations of the Federal Oom-
21 munications Commission.
22 "(ii) a 'noncontiguous area cable television* is
23 a facility located in any State, territor}^ trust ter-
24 ritory, or possession not within the boundary of
25 the fortj^-eight contiguous continental States, that
57-786—76 7
90
4
1 receives signals transmitted or makes or obtains
2 videotapes of programs broadcast by one or more
3 'television broadcast stations licensed by the Federal
4 Communications Commission and delivere such, sig-
5 nals or programs by wires, cables, or other commu-
6 nications channels to subscribing members of the
7 public who pay for such service.
8 "(iii) A. 'videotape' is the reproduction of the
9 images and sounds of a program or programs, in-
10 eluding commercials, broadcast by a television sta-
ll tion licensed by the Federal Communications Com-
^2 mission, regardless of the nature of the material
13 objects, such as tapes or motion pictures, in which
•^^ the reproduction is embodied.
91
TESTIMONY OF JOHN G. LORENZ, ACTING LIBRARIAN OF CON-
GRESS, ACCOMPANIED BY ABRAHAM L. KAMINSTEIN, FORMER
REGISTER OF COPYRIGHTS AND HONORARY CONSULTANT IN
COPYRIGHT AT THE LIBRARY OF CONGRESS, AND BARBARA
RINGER, REGISTER OF COPYRIGHTS, THE LIBRARY OF CONGRESS
Mr. LoREXz. Mr. Chairman, T am Jolin Lorenz, the Acting Librarian
of Congress. It is an honor for me to appear as the opening wit-
ness at these historic hearings, and to urge your favorable considera-
tion of H.R. 22'23, the bill for general revision of the copyright huv.
In 1905, President Theodore Roosevelt called upon Congress to'
bring together and completely revise the copyright laws of the United
States, After long hearings and several years of controversy Congress
responded by enacting a new statute on the last day of President
Roosevelt's administration. The act of March 4, 1909 remains, 66 years
later, the governing American copyright law.
President Theodore Roosevelt's message of 1905 is still valid for us
today. He wrote :
Our copyright laws urgently need revision. They are imperfect in definition,
confused and inconsistent in expression; they omit provision for many articles
which, under modern reproductive processes, are entitled to protection ; they
impose hardships upon the copyright proprietor which are not essential to the
fair practices of the public ; they are difficult for the courts to interpret and
impossible for the Copyright Office to administer with satisfaction to the public.
The aptness of Roosevelt's message today is not as ironic as it might
seem. Legislation is often specific. It grows out of individual circum-
stances and relates to definite purposes at definite times and conse-
Cj[uently is subject to change.
As time passes, the ability of courts to adapt the letter of the law
to each change diminishes. Cardozo put it well : ""The law tends to
expand to the limits of its logic." The logical limits of the present
copyright laws have long since been reached and exceeded.
In recent years there have been several important Supreme Court
decisions illustrating the inadequacy of the 1909 act. At the same
time, administrative regulations cannot cure the law's inequities and
private understandings or agreements cannot settle the crucial issues
of copyright.
Everyone affected by copyright or concerned with its administra-
tion is looking to Congress for action. New legislation, a new order-
ing of the relationships that depend upon copyright, is required, and
only Congress can do the job.
As Acting Librarian of Congress I am proud of the role that the
Copyright Office has played for many years in the efforts to reform
the existing copyright system. I am particularly pleased to see Abra-
ham L. Kaminstein here, who as Register of Copja-ights from 1960 to
1971 was largely instrumental in planning the present revision effoit.
But beyond these efforts the basic responsibility, with its broad social
and indeed philosophical implications, continues to fall upon your
subcommittee.
Mr. Chairman, you have been involved in this work for well over
a decade, and more than most, you appreciate the infinite complexity
of many of the issues treated in H.R. 2223. Ten years ago the former
92
Librarian of Congress, L. Quincy Mumford, sat before this subcom-
mittee and said :
Copyright law is by nature a diflScult and complex subject, and my under-
standing of its details is imperfect, to say the least. But, like any other intricate
field of knowledge, there are certain simple and fundamental principles under-
lying our copyright system, and their importance cannot be overemphasized.
As Dr. Mumford said, one simple principle underlying copyright
is the encouragement and reward of individual creativity. This princi-
ple is, I would suggest, a basic corollary of the principle of freedom
of speech and press. It is a recognition that those parts of our civil-
ization that have endured are the product of individual creators, and
the principle of copyright is basic to civilization itself.
But the principle of copyright is also rooted in the present, and the
practical concerns of authors and all those who disseminate and use
their works. Since 1909, the pace of technological innovation, espe-
cially in commimicationSj has been breathtaking.
In these hearings you will hear those who argue, forcefully and in
good faith, that technology threatens to strip copyright of its meaning
and value. Others, in equally good faith, will stress that copyright is
impeding the application of technology to the growing informa-
tional needs of society.
Congress must chart the way, and, difficult as that task is, it can be
made easier, I believe, by keeping always in mind the underlying
social premises of copyright in a free society.
Kecognizing the equities on both sides of the arguments you will be
hearing, the Library of Congress urges favorable consideration of
H.R. 2223. This legislation is the culmination of 15 years of pains-
taking negotiation and compromise.
It does not provide all of the answers, but it does provide a modern
framew^ork for growth and change: New tools for the courts, the
Copyright Office, for the authors and the users of copyrighted mate-
rials, to meet the challenges of the future.
This is the kind of effort that involves little widespread recognition
and a great deal of difficulty and toil. But I am convinced that, when
all is said and done, your work will have a significant impact on the
lives of all Americans — those who create and those w^hose lives are
shaped and changed by their creations.
As the present administrator of the world's greatest collection of
those creative works, I believe that your success in this endeavor will
be one of your greatest legislative achievements.
Thank you very much.
Mr. Kastenmeier. Thank you, Mr. Lorenz.
Mr. Kaminstein ?
Ms. Ringer. If I may, Mr. Chairman, I would like to ask the privi-
lege of introducing Mr. Kaminstein.
Mr. Kastenmeier. Yes, of course, Ms. Ringer.
Ms. Rtn(;er. The current program for general revision of the
copyright law started in the fifties under Arthur Fisher, who was a
great Register of Copyrights. He charted a course which we en-
deavored to follow, and he put his personal stamp on the revision
program.
Arthur Fisher died in 1960, at a crucial point in the revision pro-
gram, and was succeeded by Abraham L. Kaminstein. It is hard to
93
realize how difficult it was for Kami to take over an ongoing pro-
gram of that sort, one that had as much of a personal stamp on it
as the revision program had in 1960, and to make the changes that
were necessary to make it go, and eventually to chart a cliiferent
course— because tliere were many things in the original planning
that had to be changed.
All of these Mr. Kaminstein did. He made a number of personal
sacrifices, including sacrifices in his health. The revision program cer-
tainly would have gone nowhere without his disinterested optimism
and his willingness to explore every possibility, his spirit of good
will, and his personal integrity. He earned everyone's respect.
As a personal note, he hired me out of law school, and everything
I know about copyright I either owe to him directly or to the oppor-
tunities he gave me to learn. He is a loyal friend and a noble human
being, and it is a great honor for me to introduce him.
Mr. Kastenmeier. Mr. Kaminstein ?
Mr. Kaminstein. Mr. Chairman and members of the subcommittee,
my name is Abraham Kaminstein, and I hold the position of
Honorary Consultant in Copyright at the Library of Congress. De-
spite this fancy title, I must state that I appear before you representing
only myself and without any brief except for my own profound belief
in the value of the legislation you are considering.
I am privileged and pleased to appear before you in support of
H.R. 2223 for the general revision of the copyright law. This legisla-
tion, which many of you are now involved with for the first time, has
been for me almost a life's work.
Before my retirement in 1971 I spent 23 years in the Copyright
Office, the last 11 of them as the Register of Copyrights. Interestingly
enough, it is almost exactly 20 years since my immediate predecessor,
Arthur Fisher, asked for and was granted funds by Congress to ini-
tiate studies leading to the overall revision of the copyright laws.
Published between 1956 and 1960, 35 major studies examined cur-
rent interpretations of the 1909 Copyright Act, analyzed its short-
comings and inequities and set out alternative measures for reform.
Well over a decade later, they still remain vital and enduring con-
tributions to our law.
In the early 1960's the Copyright Office sponsored a series of round-
table discussions based on recommendations made in the 1961 Reg-
ister's Report on Copyright Revision and the preliminary legislative
drafts that began to emerge. The talks filled four volumes ; they were
sometimes difficult, but they did succeed in identifying areas of agree-
ment and dispute, thus sharpening the issues.
By 1964, it was possible to submit a bill for the general revision of
the law, and to participate in hearings in 1965 before your subcom-
mittee and under your dedicated chairmanship. Looking back to 1965.
I am startled by the scope of our achievements and I have become a bit
philosophical about the problems we failed to recognize at the tinie.
As incredible as it may seem now, our first proposals said nothing
about cal)le television, and photocopying was not regarded as an issue
which required special legislatiA^e provisions. Some of these problems
were aired in the extensive hearings which you conducted. Mr. Chair-
man, and new provisions were added, and when, in 1967, the House
passed the bill, we seemed well on our way to success.
94
We all know that the entire bill reached an impasse in the Senate
because of the inability to solve the issue of cable television. I must
confess that in 1968, recognizing that nothing was going to move
unless somehow the CATV issue could be solved or dealt with
separately, I gave in to some despair.
Testifying before the Senate Subcommittee on Patents, Trademarks
and Copyrights, I said that I had been musing on Yeats' poem, "To a
Friend Whose Work Has Come to Nothing." Nothing much to encour-
age me happened for a long time.
Certainly I feci no such despair today.
At the last session of Congress, the Senate passed the revision bill
by a margin of 70-1, and every indication seems to point to a consensus
in that body that this is a measure whose time, at long last, has come.
Although insufficient time remained in the last session for House
consideration, the status of the general revision legislation was one of
the points covered in your subcommittee's hearings on November 26,
1974, on S. 3976, a short bill whose enactment effective December 31,
1974, appears to pave the way for favorable action in both Houses
during the current Congress.
I should like to close my statement by offering some personal obser-
vations based on years of involvement with copyright revision. I should
like to recall the constructive spirit of the 1965 hearings for I fer-
vently hope that they will be repeated in the work you begin today.
Nine j^ears ago. Mr. Chairman, your subcommittee met for 51 execu-
tive sessions, over a 7-month period, to prepare a bill for the full
Judiciary Committee.
Congressmen, members of a busy subcommittee, wei-e willing and
glad to spend an extraordinary amount of time and effort on a bill
that could not have meant much to them politically, that could not
gain them any votes. What made this extraoi'dinary effort possible, and
indeed successfid. was the prevailing spirit of compromise — construc-
tive and reasonable, rather than destructive and extreme. I called it
"An Experiment in Legislative Technique." It was the most exhilarat-
ing expei'ionce of my legal careei".
All of us are special pleaders, no matter how moral we feel our case
to be. For my part, I make no bones about favoring authors, com-
posers, and ai'tists. But I know, nevertlieless, that everyone must make
some compromise. My experience convinces me that there are no easy
sl)()rtcnts in cojjyriglit, and no side can afford the luxury of a com-
plete victory. Neither can we embrace categorical solutions; what they
possess in simplicity, they sacrifice in ordinar}' justice. What is needed
is a responsible and considered compromise, for only such a compromise
will best serve the interests of nil.
Tliis will require statesmanship of the highest order, and I hope you
will feel the personal satisfaction that comes with a job well done.
Thaiik you, jNIr. (^hairman.
]Mi'. Kastkn'meier. Thank you, Mr. Kaminstein, for a most eloquent
and personal statem.ent on a subject many regard as impersonal.
I am almost sorry, however, to mention that in 1966 we had 51
executive sessions over a 7-month period. You will detect some trepida-
tion among my subcommittee members who have not been through that
experience. [Laughter.]
j\Iuch of that work will not have to be redone, I expect. Perhaps
this is not the time, as I introduce the next witness, to conmiend people
95
before our task is completed for indeed historically one day I am sure
that the names of Fisher, Kaminstein, and Ringer will, in terms of
copyi'ight and its history of this country, liave an extraordinary place.
For my part, legislatively, I would like to recall that the chairman
of the full committee, Mr. Celler, who served Congress so well for so
many years, has always felt so deeply about and has been a very great
patron of copyriglit.
From the legislative standpoint I think he also deserves very special
recognition.
In any event, I would like to call on the person on whom we are going
to have to lean heavily, not only this morning but in days to come, in
resolving whatever of the issues still remain.
We would be very pleased to hear from our Register of Copyrights,
Ms. Barbara Ringer.
Ms. Ringer. Thank you very much, ]\fr. Chairman. I am accom-
panied by Dorothy Schrader, general counsel of the Copyright Office,
who I hope will get me out of trouble if I get into it.
The Copyright Office has prepared portfolios consisting of 19 fold-
ers. 18 of which deal with separate issues or chapters of sections of the
bill. Some are much more important than others. On the left side of
each folder we have put the relevant sections on the particular issue,
and on the right side we have tried to summarize the contents of the
bill, give some of the background of the provisions and analyze the
contents of the bill in a rather simple, brief way.
Some of the provisions of the bill, as you well know, Mr. Chairman,
do not yield their meaning readily on a first, or second, or even third
reading.
In any case T hope that they will be useful to the committee. They
are intended for reference and not as fundamental legislative history.
But I hope the material on the right side can l)e considered, in effect,
my statement on the issues that are involved at this point and be made
a part of the record of the hearings. I have also a prepared statement
which is for the record and I don't think I need to go into it in vast
detail because both you, Mr. Chaii'man, and Mr. Kaminstein, have
referred to the comments I have made in it.
I would, however, like to make a few points from it and then go on
to a summary of the principal issues speaking more or less from these
briefing papers.
[The material referred to appears in app. 2.]
As I see them now but without in any way trying to predict what
other witnesses will say during the course of these hearings because I
don't think anyone, no matter how close they are to the subject, can
do that
Mr. Kastenmeier. I urge you not to oversummarize. "We do hope
that — we regard your testimony as very important at the outset to
get certain frames of reference for the committee. Some of it may
be lost to us if it is confined exclusively to the record.
Ms. RiXGER. I take your point, Mr. Chairman. Then I will read
at least a major part of this statement.
[The prepared statement of Ms. Ringer follows :]
Statement of Barbara Ringer, Register of Copyrights
Mr. Chairman, I am Barbara Ringer, Register of Copyrights in the Copyright
Office of the Library of Congress. I appear today in support of H.R. 2223, to
review its long and difficult legislative history, and to try to answer any questions
you have about its contents, its status, and the issues remaining to be settled.
The Federal copyright law now in effect in the United States was adopted in
96
1909 and has been amended in only a few relatively minor ways. It is essen-
tially a Nineteenth Century copyright law, based on assumptions concerning tJie
creation and dissemination of author's works that have been completely over-
turned in the past fifty years. A Twentieth-Century copyright statute is long
overdue in the United States, and the present need for a revised law that will
anticipate the Twenty-First Century is so obvious as to be undeniable.
It is startling to realize that the program for general revision of the copyright
law actually got underway more than 50 years ago, in 1924, and produced four dis-
tinct legislative efforts before World War II : The Dallinger, Perkins, and Vestal
Bills in 1924-1931, the Sirovich Bill in 1932, the Duffy Bill in 1934-1936, and the
"Shotwell" Bill in 1939. One of these measures passed the House, and a later
one passed the Senate, but in every case the revision program ultimately failed
of enactment because of fierce opposition to particular provisions by certain
groups. The history of U.S. copyright law revision in the 1920's and 1930's
teaches a basic lesson : the need to work out accommodations on the critical issues
in an atmosphere of good will and give and take. It is a great deal easier to
recognize the validity of this i)roiK)silit)n than to i)ut it into practice.
The failure of the earlier efforts at general revision of tlie copyright law has
been blamed on one group or another, and on the face of it there does appear to
be quite a bit of blame to go around. At the same time it is important not to
forget that the main purpose behind some of the revision bills was to permit
U.S. adherence to the International Convention of Berne. There can be little
doubt that some of the Congressional opposition to copyright law revision stemmed
from basic objections to U.S. acceptance of foreign principles of copyright juris-
prudence and to U.S. assumption of the international obligations involved in
becoming a member of the Berne Union.
After World War II the proponents of copyright law reform adopted a new
approach. It was assumed, on the basis of past experience, that efforts to revise
the copyright law in a way that would permit adherence to the Berne Convention
would continue to be futile. It was also recognized that the emergence of the
United States as a major exporter of cultural materials made our adherence to
a multilateral convention essential. Thiis. efforts to secure general revision of the
copyright law were temporarily deferred in favor of a major program aimed at
developing and implementing a new international copyright convention to which
the United States could adhere without major changes in our law. These efforts,
under the leadership of Ileglster of Copyrights, Arthur Fisher, achieved success
in 1952 with the signing at Geneva of the Universal Copyright Convention, fol-
lowed in 1954 by the enactment of revisions to the 1909 statute permitting U.S.
adherence to the UCC, and by the coming into force of the Convention in 1955.
Noteworthy as it was, the achievement of bringing the United States into the
international copyright community also served to dramatize once more how
archaic and inadequate the U.S. copyright statute of 1909 had become. The autumn
of 1955, which saw the coming into force of the Universal Copyright Convention
and the inauguration of the current program for general revision of the copyright
law, marked the end of one epoch and the beginning of another. In August 1955,
Congress authorized the formation of a Panel of Consultants on General Revision
of the Copyright Law under the chairmanship of the Register of Copyrights, and
the Copyright Office undertook a series of basic studies of the major substantive
issues involved in revision. At the same time began what has become a seemingly
endless series of meetings and discussions with representatives of virtually every
interest group affected by the copyright law. By now these discussions, which have
been as valuable as they have been time-consuming, must literally run into the
thousands.
The study phase of the current revision program began almost exactly 20 years
ago, in 1955. It was supposed to take three years, but it took about six. It pro-
duced 35 studies covering most of what we thought at the time were the sub-
stantive issues in copyright revision. These were published, together with a large
body of comments from the Panel of Consultants, and I am proud to say that they
are all still in print.
The culmination of this effort was the publication, in 1961. of the 1961 Report
of the Register of Copyrights on General Revision of the Copyright Law. The
Register's Report was the first of many major contributions to the general revi-
sion program by Abraham L. Kaminstein. INIr. Fisher's successor as Register of
Copyrights. The purpose of the Reports, as Mr. Kaminstein said in his 1962 Annual
Report, "was to furnish a tangible core around which opinions and conclusions
could crystalize — to achieve the widest possible agreement on basic principles
97
before proceeding to draft a revised copyright law." The Report attempted to pin-
point the major issues in revision, summarize the present hiw with respect to each
of tliem, analyze alternative solutions, and present specific recommendations.
The Register's Report succeeded very well in clarifying the issues and in
focusing the discussions on them, but some of its most fundamental recommenda-
tions proved more controversial than anyone in the Copyright Office had expected.
In particular, the Register's proposal for copyright to begin with "public dis-
semination" and to last for a first term of 28 years, renewable for a .second term
of 48 years, provoked a flood of opposition ; there was strong support for a single
Federal copyright system with protection commencing upon the creation of a work
and ending 50 years after the author's death. A series of meetings of the Panel
of Consultants on General Revision was held between September 1961, and March
1962, at which all of the Report's recommendations were discussed in an increas-
ingly tense atmosphere. The heated arguments at these and other meetings actu-
ally'stalled the revision program for several months and brought it to a genuine
crisis in the later summer and fall of 1962. It became apparent that, if the entire
project was not to flounder, some method for advancing and considering alterna-
tive recommendations would have to be found.
In November 1962, the Register announced that the Copyright Offiee was pre-
pared to change its position on some debatable questions and to draft alternative
language on others. He indicated that the Office was prepared to revise its recom-
mendations concerning "public dissemination" and the retention of common law
protection, and that "at least one alternative version of our draft bill will adopt
the life-plus basis for computing the term — in conjunction with a system of notice,
deposit, and registration that we consider essential." The Register also announced
that he would send preliminary drafts of .statutory language to the members of an
expanded Panel of Consultants on General Revision for their comments, and that
he would -convene another series of meetings on the preliminary draft. The proc-
ess of preparing draft language for circulation occupied practically all of 1963, and
included a total of eight meetings of the Panel of Consultants.
The development of this preliminary draft proved to l)e a difficult but enor-
mously productive phase of the program. The procedure adopted provided a motive
and a forum for detailing, critical scrutiny of the language and substance of a new
copyright statute by representatives of nearly all of the groups affected. It also
created an atmosphere of cooperative effort that has survived various stresses and
strains and has continued to grow in breadth and depth.
The preliminary draft of the general revision bill that had reached completion
at the beginning of 1964 was never intended to l)e a final report. The next six
months were devoted to compiling, analyzing, and synthesizing all of the com-
ments received on the draft, to making substantive decisions and changes on
the basis of these comments, and to preparing a complete, section-by-section
revision of the bill. The draft of the bill that emerged from this process was
prepared entirely within the Copyright Office without collaboration or consulta-
tion with any private groups or individuals. The introduction of the 1964 draft
in July 1964 'marked the end of the drafting phase of the revision program and
the opening of the legislative phase.
Like the preliminary draft on which it was based, the 1964 bill was not intended
as a finished product, but as a focal point for further comments and suggestions.
In August 1964, a full week of detailed discussions of the bill showed that a
great deal of progress had been made, but that still further revisions would be
necessary l)efore legislative hearings could profitably begin. During the fall and
winter of 1964-1965 the Copyright Office reviewed and analyzed the many oral
and written comments on the bill and prepared another complete revision.
At the beginning of the 89th Congress, on February 4, 1965, Representative
Celler introduced the 1965 general revision bill and the Copyright Office six>nt
the next three months preparing a supplement to the 1961 Register's Report.
The Supplementary Report of the Register of Copyrights on the General Revision
of the U.S. Copyright Law : 1965 Revision Bill which was published in May 1965,
set forth the reasons for changing a number of recommendations in the 1961
report and clarified the meaning of the provisions of the 1965 bill.
Publication of the Supplementary Report coincided with the oi)ening of Con-
gressional hearings on the bill. Over a period of more than three months, between
May 26, 1965 and September 2, 1965, 22 days of public hearings were held before
your subcommittee, under the objective and dedicated chairmanship of the man
who is still your chairman, Robert W. Kastenmeier. A total of 163 mtnesses,
representing an extraordinarily wide range of public and private interests,
98
appeared to testify. The record of those 1965 hearings oomprises nearly 2,000
pages of printed text, including not only the oral transcript but also more than
150 written statements. The Senate Judiciary Subcommittee under the chair-
manship of Senator John McClellan of Arkansas, held brief hearings on the
revi-sion bill in August 11*65, but delayed a full series pending the conclusion
of the inten.se activity in the House subcommittee.
Several significant factors with respect to the general revision program emerged
from the 11)65 hearings. Most obvious were the sharp controversies remaining
to be settled on some old issues (such as the jukebox exemption, the royalty rate
to be paid under the compulsory license for recording music, and the manufac-
turing requirements with respect to English-language books and periodicals),
and on some relatively new issues (such as fair use, and the reproduction of
copyrighted works for educational and research purposes, the liability of educa-
tional broadcaster.s and similar transmitter;?, and the status of community
antenna television systems under the copyright law).
Aside from the need to work out further accommodations on several critical
issues, the most serious problem arising from the 1965 hearings was now to orga-
nize the massive contents of the record in a way that would overlook no signifi-
cant comment or suggestion but that still would form a comprehensive basis for
decision-making. Working in close collaboration, the Copyright Oflice and the
House Judiciary Committee counsel prepared summaries of every statement that
had been made, and then divided the entire corpus of the hearings into ten gen-
eral areas: subject matter of copyright, ownership, duration, notice and regis-
tration, manufacturing and importation requirements, community antenna sy.s-
tems and other secondary transmissions, jukebox performances, compulsory
license for phonorecords, educational copying and fair use, and educational broad-
casting and other i>erforming rights. Each subject was then divided into sub-
topics, under which were listed every issue raised at the hearings.
This "experiment in legislative technique," as it has been called, proved effec-
tive. It enabled the House Judiciary Subcommittee, in its deliberations of the
bill, to consider each issue In context, to weigh the arguments for and against
it, and to arrive at reasoned decisions. Meeting regularly, usually twice a week,
from February through September 1966, the subcommittee held 51 executive
sessions, all of which were attended by representatives of the Copyright Office.
Examining each issue in deptli and then redrafting the pertinent section of the
bill as they went along, the subcommittee produced an entirely revised bill in
an atmosphere of informal, bipartisan discussions that could well serve as a
model for similar legislative projects.
The bill, as revised by the subcommittee, was reported Tinanimously to the full
House Judiciary Committee on September 21, 1966. and was reported without
amendment by the full Judiciary Committee on October 12, 1960. The House Re-
port still remains the basic legislative explanation of the content of the bill, and
the rei)orts succeeding it in both Houses have all been drawn from it.
The bill was reported too late in the 89th Congress for further legislative
action, and indeed none had been expected in 1966. In the revised form reported
by the House, it was introduced by Representative Celler in the 90th Congress,
and Avas considered by the newly-constituted membership of Subcommittee 3,
again chaired by Representative Kastenmeier on Feliruary 20. 24 and 27, 1967.
It was reiwrted to the full Committee on the last of these dates and, after ratlier
heated debates in the full committee on February 28 and March 2, 1967, was
again reported to the House. This time, however, the report included minority
views by Representatives Byron G. Rogers of Colorado and Basil L. Whitener
of North Carolina, devoted to the jukebox issue, and additional dissent by Mr.
Whitener on the bilFs treatment of CATV.
It was becoming increasingly apparent, as the bill moved toward the House
floor, that extremely sharp and unreconciled conflicts on the issues of jukel)ox
performance and CATV transmissions remained, and that there was a serious
danger that one or both of these issues could defeat the bill. The bill was con-
sidered by the House Rules Committee on March 8, 1967. and tlie rather acrimo-
nious arguments in the Committee before it took action authorizing full debate
on the House floor were another danger signal.
The debates of the bill in the House of Representatives on April 6. 1967. were
difficult and protracted. When the House finally recessed after 7 :00 p.m., it was
apparent that a rescue ox)eration was essential. Over the next four days, in an
atmosphere of intense crisis, several crucial compromises were achieved, and on
99
Tuesday, April 11, an amended bill was passed by the House after mild del)ate
witli the e.vtraurdinary vote of 379 yeas to 29 nays. Fairly radical changes were
made in three areas : there were drastic revisions in the provisions es-tablishing
copyri;?ht liability for jukebox performances ; the provisions dealing with com-
munity antenna transmission were dropped entirely and the exemptions for in-
s'truetional broadcasting were considerably broadened. On the other hand, the
structure and content of the bill itself has remained substantially intact.
The Senate Judiciary Committee, which had opened hearings in 1965 and had
had a short series of hearings on the CATV problem in 1966, resumed full-scale
consideration of the bill, under the joint chairmanship of Senators McClellan
and Burdick. on March 15, 1967. Indeed, tlie Senate hearings were in full swing
during the crisis in the House, and for a time the general revision program re-
sembled a two-ring circus in more ways than one. To everyone's surprise the
record of the Senate hearings, which lasted 10 days and ended on April 2S, 1967,
very nearly equals that of the House hearings in size and content.
Of the several areas that emerged as fullblown issues at the Senate hearings,
by far the most important is the iiroblem of the use of copyrighted works in
automated information storage and retrieval systems. This prolilem was ad-
dressed separately in the context of the creation of a National Commission on
New Technological Uses which Congress enacted as separate legislation only last
year, and which is still awaiting staffing.
Meanwhile, as the 1967 legislative momentum began to slow more and more,
it was increasingly apparent that cable television had become the make-or-break
issue for copyright revision. Although the Senate Judiciary Subcommittee worked
long and hard between 1968 and 1970 to resolve controversies over a number of
issues other than cable, and succeeded in reporting the revised bill to the full
Senate Judiciary Committee during the 91.s't Congress, it was not able to push
revision any further. An effort .spearheaded by the Copyright Office to gain enact-
ment of a "barebones"' bill, containing everything except the cable section and
other controversial provisions dealing with economic rights, also failed. By 1971
it was apparent that the bill was completely stymied over the CATV issue, and
even the issuance of comprehensive FCC rules in 1972, governing the carriage of
.signals and programming by cable systems, failed to break the impa.sse.
Because of this long delay. Congress has passed a series of succe.ssive bills
ex*tending the term of coi)yright. The.'^e now run through the end of the current
CVmgress, and are scheduled to expire on December 31, 1976. Tlie urgent proVt-
lem of tape piracy was also taken care of through separate legislation. A total
of seven years passed between House passage of the bill in 1967 and the resumi)-
tion of its active consideration in the Senate Subcommittee last year.
There may have been other reasons, but certainly the most immediate cause of
the revision bill's new momentum was the Supreme Court decision in CBS v.
Teleprotnpter, holding that under the 1909 statute cable systems are not lialde
for copyright infringement when they import distant signals. The decision wa.^
followed quickly by favorable actions in the Senate Judiciary Subcommittee and
full Committee and, after a brief referral to the Commerce Committee, by passage
in the Senate on September 9, 1975, by a vote of 70-1. In late November your
Subcommittee held a hearing which, in one respect was a forerunner of these
hearings. I testified in an optimistic vein at that time, and I remain hopeful
that at long la.st the entire revision measure will be enacted into law during the
current Congress.
Ms. Ringer. The Federal copyright law now in effect in the United
States was adopted in 1909 and has been amended in only a few rela-
tively minor ways. It is essentially a 19th ccntnry copyright law, based
on assumptions concerning the creation and dissemination of author's
works that have been completely overturned in the past 50 years.
A 20th-century copyright statute is long overdue in the United
States, and the present need for a revised law that will anticipate the
21st century is so obvious as to be undeniable. ,
. It is startling to realize that the program for general revision of
the copyright law actually got miderway more than 50 years ago. in
1924, and produced four distinct legislative efforts before World "War
II. I will not go through the bills, but the period covered was 1924
100
to 1939. One bill was produced just on the eve of World War II after
extensive consideration. That bill died because of the war.
One of these measures passed the House, and a later one passed the
Senate, but in every case the revision program ultimately failed of
enactment because of fierce opposition to particular provisions by
certain groups.
The history of the U.S. copyright law revision in the 1920's and 1930's
teaches a basic lesson : The need to work out accommodations on the
critical issues in an atmosphere of good will and give and take. It
is a great deal easier to recognize the validity of this proposition than
to put it into practice.
The failui'e of the earlier efforts at general revision of the copy-
right law has been blamed on one group or another, and on the face
of it there does appear to be quite a bit of blame to go around. At
the same time, it is important not to forget that the main purpose at
that time behind some of the revision bills was to permit U.S. adher-
ence to the International Convention of Berne.
There can be little doubt that some of the congressional opposition
to copyright law i-evision stemmed from basic objections to U.S.
acceptance of foreign principles of copyright jurisprudence, and to
V.S. assumption of the international obligations involved in becoming
a member of tlie Berne Union.
If it had not been for that issue, the copyright law would have
been revised during that period, in my opinion.
After World War II the proponents of copyright law reform
adopted a new approach. It was assumed, on the basis of past experi-
ence, that efforts to revise the copyright law in a way that would
permit adherence to the Berne Convention would continue to be futile.
It was also recognized that the emergence of the United States as a
major exporter of cultural materials made our adherence to a multi-
lateral convention essential. Thus, efforts to secure general revision
of the copyright law were temporarily deferred in favor of a major
program aimed at developing and implementing a new international
copyright convention to which the United States could adhere without
major changes in our law.
it was essential to develop and get implemented a new international
convention aimed at bringing the United States into a multilateral
copyright arrangement without requiring us to make major changes
in tiie 1909 law. Tliis was done under the leadership of Arthur Fisher,
then register of copyrights. They succeeded in 1952 with the signing
of the Universal Copyright Convention, followed in 1954 by the
enactment of revisions to the 1909 statute permitting U.S. adherence
to tlie UCC, and by the coming into force of the convention in 1955.
Noteworthy as "it was, the achievement of bringing the United
States into the international copyright community also served to
dr-amatize once more how archaic and inadequate the U.S copyright
statute of 1909 had become.
The autumn of 1955, which saw the coming into force of the Uni-
versal Copyright Convention and the inauguration of the current pro-
gram for general revision of the copyright law, marked the end of
one era and the beginnins: of another. I think the dividing line was
August 1955.
101
In August 1955, Congress authorized the formation of a Panel of
Consultants on General Eevision of the Copyright Law under the
chairmanship of the register of copyrights, and the Copyright Office
undertook a series of basic studies of the major substantive issues
involved in revision.
At the same time began what has become a seemingly endless series
of meetings and discussions with representatives of virtually every
interest group affected by the copyright law.
By now these discussions, which have been as valuable as they have
been time consuming, must literally run into the thousands, and they
are still going on.
The study phase of the current revision program began almost
exactly 20 years ago, in 1955. It was supposed to take 3 years, but it
took about 6. It produced 35 fairly comprehensive studies covering
most of what we thought at the time were the substantive issues in
copyright revision.
These were published, together with a large body of comments from
the Panel of Consultants, and I am proud to say that tliey are all still
in print.
The culmination of this effort was the publication, in 1961, of the
1961 Report of the Register of Copyrights on General Revision of the
Copyright Law. The Register's report was the first of many major
contributions to the general revision program by Abraham L. Kamin-
stein, Mr. Fisher's successor as Register of Copyrights. The purpose
of the reports, as Mr. Kaminstein said in his 1962 annual report:
"Was to furnish a tangible core around wliich opinions and conclusions could
crystalize — to achieve the widest possible agreement on basic principles before
proceeding to draft a revised copyright law."
The report attempted to pinpoint the major issues in revision,
summarize the present law with respect to each of them, analyze alter-
native solutions, and present specific recommendations.
The Register's report succeeded very well in clarifying the issues
and in focusing the discussions on them, but some of its most funda-
mental recommendations proved more controversial than anyone in
the Copyright Office had expected.
In particular, the Register's proposal for copyright to begin with
"public dissemination'' and to last for a first term of 28 years, renew-
able for a second term of 48 years, provoked a flood of opposition;
there was strong support for a single Federal copyright system with
protection commencing upon the creation of a work and ending 50
years after the author's death.
A series of meetings of the Panel of Consultants on General Revi-
sions, after the publication of the Register's report, was held between
September 1961, and March 1962, at which all of the report's recom-
mendations were discussed in an increasingly tense atmosphere.
The heated arguments at these and other meetings actually stalled
the revision program for several months and brought it to a genuine
crisis in the late summer and fall of 1962. It became apparent that, if
the entire project were not to founder, some method for advancing
and considering alternative recommendations would have to be found.
In other words, the Copyright Office had to reconsider its position.
102
In November 1962, the Register announced that the Coi)yright Of-
fice was prepared to change its position on some debatable questions
and to draft alternative language on others. He indicated that the
Office was prepared to revise its recommendations concerning "public
dissemination" and the retention of common law protection, and that,
'*at least one alternative version of our draft bill will adopt the life-
plus basis for computing the term — in conjunction with a system of
notice, deposit, and registration that we consider essential."
The Register also announced that he would send preliminary. drafts
of statutory language to the members of an expanded Panel of Con-
sultants on General Revision for their comments, and that he would
convene another series of meetings on the preliminary draft.
The process of preparing draft language for circulation occupied,
jDractically all of 1963, and included a total of eight meetings of the
Panel of Consultants.
The development of this preliminary draft proved to be a difficult
but enormously productive phase of the program. The procedure
adopted provided a motive and a forum for detailed, critical scrutiny
of the language and substance of a new copyright statute by repre-
sentatives of nearly all of the groups affected.
It also created an atmosphere of cooperative effort that has survived
various stresses and strains and has continued to grow in breadth
and depth.
The preliminary draft of the general revision bill, tliat had readied
completion at the beginning of 1964, was never intended to be a final
product. The next 6 months were devoted to compiling, analyzing,
and synthesizing all of the comments received on the draft, to making
substantive decisions and changes on the basis of these comments,
and to preparing a complete, section-by-section revision of the bill.
The draft of the bill that emerged from this process was prepared
entirely within the Copyright Office without collaboration or con-
sultation with any private groups or individuals involved. The intro-
duction of the 1964 draft in July 1964, marked the end of the draft-
ing phase of the revision program and the opening of the legislative
phase.
Like the preliminary draft on which it was based, the 1964 bill
was not intended as a finished product, but as a focal point for further
comments and suggestions. In August 1964, a full Aveek of detailed
discussions of the bill showed that a great deal of progress had been
made, but that still further revisions would be necessary befoi-e legis-
lative hearings could profitably begin.
Durino; the fall and winter of 1964-65, the Copyright Office reviewed
and analyzed the many oral and written comments on the bill and
pi'epared another complete revision.
At the beginning of the 89th Congress, on February 4, 1965, Rep-
resentative Celler introduced the 1965 General Revision bill and the
Copvriffht Office spent the noxt 3 months preparing a supplement to
tho 1961 Recfister's Report. The '^ui^plementary roport of the Remster
of Copyri2"hts on the General Revision of the TT.S. Copyright Law:
1965 Revision bill which was pu])lished in INfav 1965. s^t forth ^'^'f'
I'pasons for chanjnnp- n number of recommendations in the 19fi1
To^^ort nnd clarified the meaning of the provisions of the 1965 bill.
Publication of the supplementary report coincided with the open-
103
ing of congressional hearings on the bill. Over a period of more than
3 months, between May 26, 1965 and September 2, 1965, 22 days of
public hearings were held before your subcommittee, under the ob-
jective and dedicated chairmanship of the man who is still your
chairman, Robert W. Kastenmeier.
A total of 163 witnesses, representing an extraordinarily wide range
of public and private interests, appeared to testify. The record of
those 1965 hearings comprises nearly 2,000 pages of printed text,
including not only the oral transcript but also more than 150 written
statements.
The Senate Judiciary Subcommittee under the chairmanship of
John McClellan of Arkansas, held brief hearings on the Revision
bill in August 1965, but delayed a full series pending the conclusion
of the intense activity in the House subcommittee.
Several significant factors with respect to the general revision
program emerged from the 1965 hearings. Most obvious were the
sharp controversies remaining to be settled on some old issues —
such as the jukebox exemption, the royalty rate to be paid under the
compulsory license for recording music, and the manufacturing
requirements with respect to English-language books and periodicals—
and on some relatively new issues — such as fair use, and the reproduc-
tion of copyrighted works for educational and research purposes,
the liability of educational broadcasters and similar transmitters,
and the status of community antenna television systems under the
copyright law.
Aside from the need to work out further accommodations on sev-
eral critical issues, the most serious problem arising from the 1965
hearing was how to organize the massive contents of the record
in a way that would overlook no significant comment or suggestion
but that still would form a comprehensible l^asis for decisionmaking.
Let me say a personal word about those 51 days of subcommittee meet-
ings, since they were very significant.
Working in close collaboration, the Copyright Office and the House
Judiciary Committee counsel prepared summaries of every state-
ment that had been made, and then divided the entire corpus of the
hearings into 10 general areas: Subject matter of copyright, owner-
ship, duration, notice and registration, manufacturing and importa-
tion requirements, community antenna systems and other secondary
transmissions, jukebox performances, compulsory license for phono-
records, educational copying and fair use, and educational broad-
casting and other performing rights.
Each subject was then divided into subtopics, under which were
listed every issue raised at the hearings.
The "experiment in legislative technique,'' as it has been called,
proved effective. I think the effectiveness will become more and more
apparent as you progress in 1975. It enabled the House Judiciary
Subcommittee, in its deliberations of the bill, to consider each issue
in context, to weigh the arguments for and against it, and to arrive at
reasoned decisions.
Meeting regularly, usually twice a week, from February through
September 1966, the subcommittee held 51 executive sessions, all of
which were attended by representatives of the Copyright Office.
Examining each issue indepth and then redrafting the pertinent sec-
104
tion of the bill as they went alon*;, the subcommittee produced an en-
tirely revised bill in an atmosphere of informal, bipartisan discus-
sions that could well serve as a model for similar legislative projects.
The bill, as revised by the subcommittee, was reported unanimously
to the full House Judiciary Committee on September 21, 1966, and
was reported without amendment by the full Judiciary Committee on
October 12, 1966.
The House report still remains the basic leo-islative explanation of
the content of the bill, and the reports succeeding it in both Houses
have all been drawn from it.
The bill was reported too late in the 89th Congress for further
legislative action, and indeed, none had been expected in 1966. In
the revised form reported by the House, it was introduced by Repre-
sentative Celler in the 90th Congress, and was considered by the newly
constituted membership of Subcommittee No. 3, again chaired by
Representative Kastenmeier, on February 20, 24, and 27, 1967.
It was reported to the full committee on the last of these dates, and,
after rather heated debates in the full committee on February 28 and
March 2, 1967, was again reported to the House.
This time, however, the report included minority views by Rep-
resentatives Byron G. Rogers of Colorado and Basil L. Whitener of
North Carolina, devoted to the jukebox issue, and additional dissent
by Mr. Whitener on the bill's treatment of C ATV.
It was becoming increasingly apparent, as the bill moved toward the
House floor, that extremely sharp and unreconciled conflicts on the
issues of jukebox performance and CATV transmissions remained,
and that there was a serious danger that one or both of these issues
could defeat the bill.
The bill was considered by tlie Plouse Rules Committee on March
8, 1967, and the rather acrimonious arguments in the committee be-
fore it took action authorizing full debate on the House floor were
another danger signal.
The debates of the bill in the House of Representatives on April 6,
1967, were difficult and protracted, to say the least. When the House
finally recessed after 7 p.m., it was apparent that a rescue operation
was essential. Over the next 4 days, in an atmosphere of intense crisis,
several crucial compromises were achieved, and on Tuesday, iVpril 11,
1967, an amended bill was passed by the House after mild debate with
the extraordinary vote of 379 yeas to 29 nays.
Fairly radical changes were made in three areas: There were dras-
tic revisions in the provisions establishing copyright liability for juke-
box performances; the provisions dealing with community antenna
transmission were dropped entirely and the exemptions for instruc-
tional broadcasting were considernbh/ broadened. On the other hand,
the structure and content of the bill itself has remained substantially
intact.
The Senate Judiciary Subcommittee, which had opened hearings
in 196.5, and had had a short, series of hearinirs on the CATV problem
in 1966, resumed full-scale consideration of the bill, under the joint
chairmanship of Senators McClellan and Burdick, on March 15,
1967.
Indeed, the Senate hearings were in full swing during the crisis in
the House, and for a time the general revision program resembled a>
105
two-ring circus in more Avays than one. To everyone's surprise the
record of the Senate hearings, which lasted 10 days and ended on.
April 28, 1967, very nearly equals that of the House hearings in size
and content.
Of the several areas that emerged as fullblown issues at the Senate
hearings, by far the most important is the problem of the use of
copyrighted works in automated information storage and retrieval
systems. This problem was addressed separately in the context of
the creation of a National Commission on New Technological Uses
which Congress enacted as separate legislation only last year, and
which is still awaiting statnng from the White House.
Meanwhile, as the 1967 legislative momentum began to slow more
and more, it was increasingly apparent that cable television had be-
come the make-or-break issue for copyright revision. Although the-
Senate Judiciary Subcommittee worked long and hard between 1968
and 1970 to resolve controversies over a number of issues other than
cable, and succeeded in reporting the revised bill to the full Senate
Judiciary Committee during the 91st Congress, it was not able to push
revision any further.
An effort spearheaded by the Copyright Office to gain enactment
of a "barebones"' bill, containing everything except the cable section
and other controversial provisions dealing with economic rights, also
failed for tactical reasons.
By 1971, it was apparent that the bill was completely stymied over
the CATV issue, and even the issuance of comprehensive FCC rules
in 1972, governing the carriage of signals and programing by cable
systems, failed to break the impasse.
Because of this long delay, Congress has passed a series of succes-
sive bills extending the term of expiring copyrights. These now run
through the end of the current Congress, and are scheduled to expire
on December 31, 1976. The urgent problem of tape piracy was also
taken care of through separate legislation.
A total of 7 years passed between House passage of the bill in 1967
and the resumption of its active consideration in the Senate subcom-
mittee last year.
There niay have been other reasons, but certainly the most im-
mediate cause of the Revision bill's new momentum was the Supreme
Court's decision in CBt^ v. Teleprompter^ in March 1974, holding
that under the 1909 statute, cablp svstems are not liable for copyright
infringement when they import distant signals.
The decision was followed quickly by favorable actions in the
Senate Judiciary Subcommittee and full committee and, after a brief
referral to the Commerce Committee, by passage in the Senate on
September 9, 1975, by a vote of 70 to 1.
In late November, your subcommittee held a hearing which, in one
respect, was a forenmner of these hearings. I testified in an optimistic
vein at that time, find I remain hopeful that at long last the entire
revision measure will be enacted into law during the current Conjrress.
Mr. Chnirman, this is the end of my prepared statement, but I
would also like to identifv seven or perhaps eifrht issues which will cer-
tainly com.e before you. I am preparing what I hone will be a spr>ond
supplementary report of thf- register of copvrijrhts which w^ll \\&
j.^ „o- — 7n — pt. 1 8
106
available to you and also to the subcommittee by the time you need to
consider the bill in a markup sense.
This would not be something that would be part of the record of
this hearing, but I would hope that I might have a chance to speak
to it again later toward the end of these hearings or perhaps during
the markup sessions.
I have no intention now in trying to guess what the other witnesses
are going to say or in arguing anyone's case.
My feeling as the head of the Copyright Office is that my respon-
sibility is to one group and one group only, and that is the group
that is identified as the sole and only beneficiary of the copyright law
of the United States under the Constitution, the authors of the
so-called writings. In other words, the creators of copyrighted works
as we now know them.
I am profoundly of the belief that authors in this country have
been treated shabbily and stingily from the very beginning of our
copyright system.
And, whatever I say will be with the thought that the situation
of authors, not only as the creators of works of economic value, but
as something that is infinitely precious to our country, needs to be
promoted.
I don't think this has been done effectively under previous legisla-
tion. I will return to this point later. I am also conscious that everyone
else besides the author is a user of the author's work, and as between
users there may be arguments which are extremely persuasive for rea-
sons unrelated to protection of the author but in some respects are
irrelevant to the essential purpose of the copyright law.
In these areas I think compromises liave been reached. I think com-
promises have been necessary and I think further compromises will
be made. But it is vitally important that you consider the effect of a
])articular provision on the individual author and not primarily of
its effect on an economic group using th& author's work for good
or for ill.
- Turning to H.R. 2223, as it now stands, I will try to give you an
idea of its framework and its approach and pinpoint a few of the
major issues that you will be hearing debated in the weeks to come.
In the long, I am afraid, and rather boring statement that I made
on the history of this project, I did want to make a point. Obviously,
there is a long history behind the provisions in this bill, and aside from
the chairman, all the members of your subcommittee are coming on it
as new legislation, and you should not take it on faith.
No one in their right mind would ask you to. Wliat I am trying to
say, though, is that your predecessor members on tlie subcommittee
went over most of these provisions in vast and searching detail. And,
to a remarkable degree, aside from a few of the widely-publicized
issues like cable, your subcommittee did its work so well that the
basic legislation and its wording have become generally accepted.
A lot of things are not issues that once were, because what you did
has been accepted. I think you will realize this as you go along.
Very simply, the present law is outdated, it is vague, it is ambiguous,
it is arbitrary, and results in a great deal of unproductive work both
on the part of those who have to operate under it and on the part of
the Copyright Office.
107
It is comijletely unlike any other copyright law in the world and, in
some cases, is simply a historic vestige. We have in this country a dual
system of copyright. We are the only country that has this. We have a
system that consists of common law copj'right in a work up to the
point of first publication. At that point the work either falls into
the public domain or it becomes subject to statutory copyright. Pub-
lication is the dividing line between common law protection and
either the public domain or the limited statutory protection of the
1909 law.
I don't think I need to stress that the concept of publication has
now become outdated and slightly ridiculous. We are now in an
era in wliich there are very few works that are not capable of being
disseminated by media other than print, and many works never see
print and are disseminated entirely through various electronic media.
Tliis system has resulted in peculiarities and injustices, none of
these less than the monsti'ous formalities that were retained and added
to in the 1909 law. The fact is that if you publish a work, publish in the
print sense, without a coj:)yright notice in the correct form and posi-
tion, you throw your work into the public domain regardless of what
your intentions were.
The revision bill attempts to deal with the entire copyright situ-
ation as it now exists and, to the extent that it is possible to predict it,
into the next century.
It provides essentially a simple system which is nothing novel. This
system exists everywhere in the world. It is a system of a term based
on the creation of the work. In other words, when the author figura-
tivelv lifts his pen from his paper, he has a copyright under the Fed-
eral law and under the Constitution, and he has it for his lifetime.
There is no possibility that it would expire during his life, which
is possible and in fact likely, under the present law. The international
norm for the term of copyright is the life of the author plus 50 years.
This is now in effect in a large majority of countries that have copy-
right laws.
Mr. DA>nLELS0N. Mr. Chairman, I should like to inquire.
Mr. Kastexmeier. The gentleman from California.
]Mr. Daxielsox. Ms. Ringer, you just mentioned that automatically
under the bill the creator has a lifetime copyright. Perhaps as we go
along as a new member of this subcommittee, I will have my present
question resolved.
As I read the Constitution it authorizes to secure for limited times
and in the absence of compelling evidence I am going to assume we
have the right to make that less than a lifetime.
Can vou explain that difference, please ?
Ms. Rix'GER. There is nothing unconstitutional about the present
law which provides a first term of 28 years with a second term under
a renewal system of 28 yeare ; and as I mentioned this second term has
been extended by recent enactments of Congress.
There is nothing unconstitutional about that. At the same time, I
would find mvself unable to agree with any argument that a term
based on the life of the author and a finite number of years after his
death was not a limited term.
Obviously people die. Evervone dies and that in itself is a limited
term. If you add 50 years after that, you are definitely creating a
limited term.
108
I think a better argument could be made that, under the present
law, when you lift the pen from the paper you have an automatic
common law copyright that is perpetual as long as the work is not
"published."
And I believe there might be some question as to whether or not
this is constitutional. That there are many, many manuscripts sitting
over in the Library of Congress Mhich may well be subject to protec-
tion for generations, centuries, perhaps even eons.
This seems against the public interest. One of the arguments for a
life-plus-50 term is that not only does it provide a clearcut cutoff date
but the date is the same for eveiy work that an author writes.
In other words, for all of an author's works under a life-plus-50
system, every work falls into the public domain at the same time
and you don't have tliis syst^^m that we have now where you have to
do a lot of research to determine when a work falls into the public
domain.
Mr, Dantelson. Suppose Congress would enact a law which would
limit this to 10 years, which might very well be less than a lifetime?
]Ms. Ringer. I am not suggesting that the system in the bill is some-
thing dictated by the Constitution or anything other than interna-
tional norms that have been established and accepted throughout the
rest of the world.
Whfit I am sayinr;: is that 10 years might be sufficient
Mr. Danielson. I am only talking about constitutionality. If we
limited a copyright to 10 years, I can see no reason why that would
not be constitutional.
j\Is. Rtnger. Nor can I.
Mr. Kastenmeier. You may continue.
Ms. Ringer. Thank you. The present 'bill, the bill we are now con-
sidering, H.R. 2223, in addition retains the formalities that have been
bugaboos under the present law, but liberalizes them to the extent that
they are not the all-or-nothing disasters that authors face now.
In other words, if you publish your work without a notice or with
an incorrect notice, the bill allows you to correct your mistake. This is
true of other formalities. You would do something because there is
a reason for it and not just because the law says you have to.
There is another provision which I am doubtful anyone will raise
as an issue, but I might mention in the context of the general content
of the bill. There are reforms that are of benefit to authors and artists
with respect to ownership, in addition to the longer term, and one of
the m.ost notable of these is in section 203 of the bill.
Instead of the present complex and rather arbitrary and ca-
pricious renewal provisions, it allows an author or his beneficiaries
to re-do a bad deal. In effect, the present law was intended to accom-
plish that result but has been most imperfect in doing this.
Section 203 is the reversion provision which basically allows an au-
thor, if he is still living or his widow and children and grandchildren
to terminate a transfer after 35 years under certain circumstances.
If they don't do that, then the contract continues. If they do do it,
then tliev have nn absolute right to call the deal to a halt. In my
opinion, despite the complexity of the provisions, it is a real plus for
authors.
109
Let me say that most of the real issues that you are going to be con-
sidering are not going to be before you in the testimony. The real issues
are the reform of the copyright law and the things that I have been
talking about.
The issues that you will be hearing about are very, very important
to authors, among other groups, but they are almost all outside the
basic guts, if you will, of the bill itself.
The most important of these separate issues still remains, cable tele-
vision. There were some hopeful signs in the early seventies that an
agreement might be reached on this issue, but they turned out to be
somewhat premature.
Let me say that your subcommittee in the middle sixties was a
pioneer on this issue. It hit your predecessors cold. There had been
some consideration of this in the context of FCC regulations and
Senator Pastore had sponsored a bill in the communications area.
But in terms of the major issues raised by copyright liability for
cable operators, no one before you, in my opinion, had come to grips
with the ultimate problems, the question of division of markets, and
the importation of local as against distant signals and how the whole
thing might be wcrked out in a way that will benefit authors.
Your first essay on this, your bill that was put before the House
in 1967, was a pioneering effort, and no one should be ashamed of it.
I think it is recognized today as more sophisticated than anyone
could have expected for a bill at that time. You recognized complex
truths about this important public issue before others did and in fact
up until the end of the sixties, people were still asking, what is cable
television ?
This issue, I believe, is finally approaching a resolution, although
there will be sharply conflicting testimony. You cannot blame people
for wanting to get the best deal they can, and nothing is black, white,
or even gray on this issue.
I will answer any questions that you have. The bill itself establishes
a compulsoiy licensing system which in effect is based on this prin-
ciple, that if the FCC says that a system can carry a signal, then the
system automatically has a compulsory license to cairy that signal
and the copyrighted i)rogram, on the signal, and there is an
elaborate compulsory licensing procedure and a complex schedule of
fees that cable systems would have to follow and pay in order to
insulate themselves from liability for copyright infringement.
Essentially, the thing is basically a complete compulsory license.
The bill that you reported in 1967 did not have a compulsory license
for CATV, although you considered it. It did have exemptions and
complete liability. It was black and white and no gray.
What has emerged is quite different and yet I think that the prin-
ciples underlying it are still the same principles and I think the result
is probably an acceptable one.
The testimony you hear, I hope, will be largely over the details of
the systein and not whether or not cable ought to pay. There will be
some testimony to this effect, but it seems to me that maybe we are
beyond that point. As things stand now, it is mainly a question of
how they pay and how much.
Another issue which was not dealt with by your committee at all,
although you heard testimony on it, was that of library photo-
no
copying and I AYOuld rank this as tlie second most important issue in
the bill.
It is now dealt with in section 108 of H.R. 222.3. The reason that you
did not report a provision on this subject was that the parties re-
spectively, and for absolutely opposite reasons, agreed that the bill
should not address the problem.
At that time, and it was before the full impact of library photo-
copying and photocopying machines generally had been felt, the feel-
ing on the part of the copyright owners was that a provision specify-
ing explicitly what the liability of libraries would be would have dele-
terious effects, since the owners felt that they had complete rights and
libraries should not photocopy at all without paying. The library
community felt just the opposite.
I think it was a mistake for the bill to say nothing. Looking back,
I think that some provision on this was essential. What has emerged
in section 108 has been fought over in a friendly way for a number
of years in the Senate context. Essentially, section 108 insulates
libraries from liability for the operation of coin-operated machines
on their premises and allows them to photocopy single copies of
articles and excerpts from journals and books, and so forth, in their
collections. If it is clear that a work is out of print, they can make
a single complete copy for a user. Some of this activity can be carried
out for inter-library loan purposes.
The big issue in section 108 is found in subsection (g) , and the brief-
ing paper in the folder that I will give you goes into this in some
detail.
Under the final version that emerged in the Senate, after saying
what libraries can do, the bill says that this does not apply to multiple
copying, including making multiple copies one at a time and it does
not apply to single copying when it is done systematically.
It is still not altogether clear in anyone's mind what systematic
copying means, but there is a good deal of concern on the part of
librarians as to the chilling effect this would have on their interlibrary
loan and network activities which are ongoing and very important as
a public issue.
This is something that badly needs resolution. You passed and the
President did sign on December 81 of last year, a bill setting up a
national commission that has as part of its mandate, a study of this
problem.
At the same time you yourselves, will have to decide what section 108
and specifically section 108(g), says on this particular subject. There
are other activities going on in the library photocopying arena and
you will hear more about them as your hearings proceed.
An issue of great immediate importance in the subcommittee level
right now is the liability of public broadcasting. In 1967 your subcom-
mittee agreed that instructional television should be given an ex-
emption to a certain extent from copyright liability and during the
House debates, this exemption was expanded.
But at the same time the exemption was limited to instructional
television. Public broadcasting which to some extent enjoys an exemp-
tion today would be liable under H.R. 2228. The public broadcasters
and their representatives have been seeking a very broad and far-
Ill
reaching compulsory license with respect to the use of copyrighted
material other than motion pictures, audiovisual works and dramatic
works.
Their concern is with the high cost and difficulty in getting clear-
ances and the fact tliat their budget does not permit them to do the
clerical work or to pay extensive royalties.
The Senate subcommittee staff is now engaged in a series of meet-
ings trying to resolve this issue. The signs are relatively hopeful and
perhaps with certain amounts of good will and cooperation, you will
not have to face what is known generally as the Mathias amendment,
which would be the proposal for a compulsory license covering public
broadcasting.
Related to this is another amendment put forward in the last Con-
gress by Senator Bayli which would extend to an unlimited amount
the number of recordings, tapes, that an instructional broadcaster
could make of broadcasts for use in delayed broadcasts or throughout
the whole complex of instructional broadcasting.
In my opinion, this is an important issue but it is not as important as
the Mathias amendment, and I expect the two will be considered
together whenever they get to you.
In the area of jukeboxes, a very difficult compromise was achieved
in 1967 and, astonishingly, it has held up. This involved a compulsory
license for jukebox performances with a payment of $8 by jukebox
operators per box per year, the payments being made into the Copy-
right Office and then disbursed under the procedure provided.
"As a result of the cable wars in the Senate, an amendment was added
w^hich establishes a copyright tribunal, chapter 8 of the bill, and gives
it a double mandate. First, in certain cases, the tribunal would settle
disputes with respect to the disbursement of fees. This does not seem
objectionable to most people.
But in addition the tribunal would be called upon, through what in
effect is a compulsory arbitration system, to review the rates of the
compulsory licenses "that are set under the bill, and recommended
changes which would become effective unless Congress chose to wipe
them out.
The jukebox operators objected to $8 being subjected to a review,
and in the Senate consideration last Septeml^er, Senator Hollincrs put
forvrard an amenrlment that took the jukebox rate out from under the
tribunal review. This is the form in which the bill now appears.
The jukebox rate is frozen at $8 and it is not subject to review. I
am reasonabl}^ sure you will hear testimony on this issue in the davs
to come.
I believe that this is the only real issue remaining with respect to the
jukebox problem which, without any question, was our biggest head-
ache in the early sixties.
The other economic issue that you will hear testiTuony on is the
amovuit of the rate for the old traditional compulsory license covering
the making of sound recordings of musical compositions.
The 1909 law was a pioneer. It adopted the first compulsory license
in any field. It established a system which is still in efTect today that
allows a record producer to make a record of a copyrighted musical
composition without permission if he follows a compulsory licensing
procedure and pays 2 cents per record per song.
112
One can wonder how 2 cents in 1909 could possibly still be viable
today. The answer is probably that the LP resulted in the unit price
going from 2 cents to about 20 cents or in some cases 24 cents as a
ceiling.
But at the same time it has been argued very forcefully that the 2-
cent rate is infinitely too low, even considering the LP and the other
structural changes that have occurred in that industry. In the 1965
hearings, there was massive testimony of a statistical nature dealing
with the validity of the 2-cent rate.
Your committee agreed to 21/^ cents as a reasonable rate at which to
peg the royalty.
The Senate, facing an inflationary curve which had only just started
in 1965, raised the fee to 3 cents after considering at one point a 3V^-
cent rate. This is still a very, very sharp controversy and I think you
better prepare yourself for quite a lot of statistics within tlie coming
weeks.
Finally, and the seventh issue that I will mention, is the performance
right for records which has the — as the chairman mentioned
'^f~'
Mr. Kastenmeier. May I interrupt ? I have five : Cable TV, library
photocopying, liability of public broadcasting, jukeboxes, public
recording.
Ms. Ringer. I am sorry. I accidentally skipped one, the question of
educational use other than broadcasting and it will be the subject of
one of your days of testimony, if not more. In the 1965 hearings, you
heard a good deal of testimony on the issue of classroom photocopy-
ing and other copying by teachers of copyrighted material.
This was put forward in the context of the fair use provision which
is now section 107 of the bill and is a rather general statement of the
doctrine of fair use.
The question was whether or not a vague provision of this was suf-
ficient to give teachers guidance as to what they could and could not
do with respect to copyrighted material, except when they had at their
fingertips a good deal of electronic and other machinery for using copy-
righted materials and making them available to their students and
pupils. At the time, you sought to solve this problem by considering
all of the arguments that had been made and attempting in the report
to lay out what the committee regarded as fair use in this context.
There are about four closely packed pages still in the report, in the
Senate version, that reflect your committee's actual drafting of what
you considered the scope of fair use to be in this context of classroom
teaching.
This has not, I think it is fair to say, satisfied the educational rep-
resentatives. I believe you will hear proposals on this issue and I would
list this as one of the seven major issues.
An adjunct to the seven is the copyright royalty tribunal which is
an issue in itself but arises in the context of three of the other issues
and also of a fourth, wliich is the seventh of the major issues, the per-
formance right in records.
The testimony in 1965 on this issue was very interesting. The
record producers put forward a very strong case for anti-piracy legis-
lation and during the hearing, after testimony by performers and per-
formers' representatives, they added to that a proposal for a per-
forming right in recordings. That would mean payment under some
113
sort of system for playing records on disc jockey programs, for playing
records on iukeboxesj and for playing records on cable television and
music systems.
I draw a distinction at this point between the music on the record
and the recording itself. The music is already protected against all of
these uses except cable and jukebox and would be protected against all
of them under the bill.
The stopgap legislation that you passed in 1971 effective in 1972,
created a copyright in a sound recording that would extend to any
creative elements present in the recording but limited it to the particu-
lar situation of so-called piracy, unauthorized duplication, usually on
8-track cartridges.
This legislation which was temporary in its 1971 form was stand-
ardized as permanent legislation in 1974 and is now part of the copy-
right law. I don't regard "piracy" as an issue. It may become one.
What is an issue, and the major issue in the Senate consideration of
the bill in 1974, was the proposal that a performing right be added
to the law that would allow the collection of royalties for the playing-
of records as such on radio, television, cable, jukeboxes, and so forth.
The sponsor of this legislation in the Senate was Senator Scott. The
bill contained this provision when it went to the floor of the Senate
and was knocked out in a rather heated debate during that con-
sideration.
Senator Scott has reintroduced the proposal as a separate bill and.
Kepresentative Danielson has introduced the same bill. In the Senate
subcommittee I gather there will be hearings on the Scott bill and there
is a possibility that it might be joined with the revision bill.
In any case it is not a piece of separate legislation in its real effect.
I think it is something your subcommittee should consider as part of
the overall picture of general revision.
I repeat, however, that the Danielson bill is a revision of the 1909
law, which is the approach that is being taken in the Senate by Senator
Scott. I am not sure I have made that clear.
I should say on this point that I believe very strongly that sound
recordings and the performances incorporated in them are creative
works, that they are the writings of an author, and that they are sub-
ject to copyright protection under the Constitution.
There is no doubt about this in my mind and I believe that your ac-
tion in passing legislation that recognizes sound recordings as copy-
rightable and protects them against piracy is consistent with that
view. It is not whether they should be protected but how they should
be protected, whether protection should go beyond piracy to inchido
tlie payment of royalty for performances by various media. In prin-
ciple, I support that, too.
I think that the ways of working it out need to be carefully con-
sidered. The proposal in the old section 114 in the Senate version in
1974 had problems of a practical nature, but I am not sure that they
are insuperable.
These are the seven major issues and much of the testimony you will
hear will be centered around them and will be economic in nature. In
addition to this you will hear discussion at various points of the manu-
facturing clause, section 601 of the bill, and which is a disgraceful
vestige, in my opinion, of 19th century protectionist thinking.
114
The manufacturing clause was added in the 1891 Copyright Act as
the price the printers exacted for allowing copyright to be extended
to foreign authors. They had been getting a free ride up to that point
and they insisted that, as a price for allowing Dickens and Tolstoy to
be protected in this country, the works could not be copyrighted un-
less they were printed here.
This'provision, which was bad legislation to begin with, has become
eroded over the years and in 1965 it was eroded some more. The Reg-
ister's initial recommendation was that it be done away with. It became
apparent that it could not be knocked out of the bill without a major
fight.
As a result, it has been retained with a considerably narrowed scope.
I believe that the principal arguments you will hear, perhaps tomorrow
and in succeeding days, involve the fact that we are now equating
Canada with the United States in terms of the place of manufacture,
and this raises a host of technical questions which I won't go into. I
think there has been accommodation among the parties and there-
fore it is unlikely you will find people attacking the manufacturing
clause out of hand, as I have just done.
Yet personally I find it very, very bad legislation and would like to
see it gone. It may not be practical to do that.
I believe you will also hear testimony from artists and their repre-
sentatives with respect to the unsatisfactory situation of artists under
the present law.
I think this is a valid argument. The revision bill would help artists
but probably would not go as far as they would like it to.
Mr. Kastenmeier. When you say '"artists,"' whom do you have in
mind ?
Ms. liiNOER. Painters, sculptors, graphic artists, and designers. I
wanted to mention the design bill. Title II of the bill is a completely
separate piece of legislation which was conjoined with the revision;
bill in the Senate more or less as legislative expediency at the time.
The two prol)lems are related and I have no objection to them being
addressed together. I think this is probably a good idea.
But you will find differences in approach between them, and a bridge
provision in section 118 deserves your attention. I think the design bill
is a good l)ill and it deserves to be passed whether as a title II of this
overall omnibus revision or separately.
It is then unclear whether there wnll be a debate over it. There has
not been in the Senate.
There are other issues. There is a proposal that would exempt a
proprietor of a ballroom or similar place of entertainment from
liability and place the liability on the performing organization.
There are undoubtedly dozens of other little or perhaps not so little
issues that will arise during these hearings. But I have tried to
give vou the overall framework of what you will be hearing, and in my
opiiiion you do not need to go back to ground zero.
I don't thin]<: you need to start at the beginning. I think you can
consider many issues settled, thanks to your efforts in the sixties. Your
prol^lem is not a simple one but I think it is something that is solvable
and I am extremely encouraged by the scheduling of hearings and the
general atmosphere that I find here today.
Thank you, Mr. Chairman.
115
]Mi-. Kastenmkieu. Tliank you. Ms. Ringer, for a very comprehensive
review historically of the issues involved in copyright law revision.
The Chair will state, that at our next hearing, we will have Govern-
ment represented by three other entities, the Justice Department, the
Commerce Department, and the State Department, and to some extent,
other aspects will be more deeply explored with reference to the bill in
terms of its administration from the governmental point of view.
I haA^e at this point just a couple of questions and then I would like
to yield to my colleagues. From time to time there have been argu-
ments made that we could leave something out of the bill.
Indeed, from time to time, certain areas have not been covered in the
bill. But is it not the case, this being a unitied code, that the operation
of the bill does apply whether or not we specifically deal with a subject
or not? That is to say, all we have done in a sense is by our nonstate-
ment, to leave the matter somewhat unresolved in terms of potential
litigation?
Therefore, we can really not fail to deal with an issue. It will be
dealt with one way or the other. The code, title 17, will cover it. So we
have made a conscientious decision even by omission. Do you agree ?
Ms. PiiNGEK. I would agree. In 1909 there was probably no intention
to protect sound recordings. I think the legislative history would bear
this out although it is ambiguous. In the early 1970's there was an in-
crease in record piracy because of the increasing popularity of 8-track
cartridges. As a result, there was a major effort to g>et States to pass
legislation or to enforce common law protection of what were clearly,
in a layman's sense, published works because of the lacuna in the 1909
statute. There was no explicit protection. This issue went all the way to
the Supreme Court and the Supreme Court upheld the validity of a
State criminal statute against record piracy on the ground that Con-
gress had not preempted that protection since it had failed to act.
You may not even be refraining deliberately from giving protection,
which I think was the thrust of your question. You may, in fact, be
handing them State protection which is variable and inconsistent in
many cases and has a lot of imdesirable features. These were the very
imdesirable features that INIadison mentioned in the "P'ederalist
Papers'' when he was defending the copyright clause in the
Constitution.
Mr. Kastenmeier. By virtue of passing this bill, we will deal with
every issue. Whethei" we deal with it completely or not for the purpose
of resolving the issues involved is the only question, not whether it has
dealt with the four corners of the bill because the four corners of the
bill will presume to deal with everything in copyright.
"Ms. Ringer. I quite agree, Mr. Chairman.
]Mr. Kastexmeier. One of the apprehensions that, as we develop
this bill and probably future amendments to it, is that by creating
rights and extending rights, we might make the law very compli-
cated given the present state and future state of society, that the
business of getting clearances and knowing what levels of rights are
really being accorded may get extraordinarily difficult, particularly
for users.
What is your comment to that ?
Ms. RixGER. This has been a concern to us in the Copyright Office,
too. There are some situations — and I think cable is one of the best
examples I have ever seen — that are so intrinsically complicated that
you cannot deal with them in a broad-brush way.
116
I think that your efforts to deal with the CATV problem in 1965
which were attacked as being terribly complicated are extraordi-
narily clear and simple compared to the FCC regulations which in
effect did the same thing.
At the same time, I am very disturbed about the increasing reliance
on compulsory licensing to resolve difficult conflicts. The law is so out
of date that tliere are now areas in which authors are simply not being
protected at all. In these areas there have built up user interests that
are so strong and so deeply embedded that to impose outright copy-
right liability, with no if s, and's or but's, would create very serious
problems.
Because the 1909 law has been allowed to become hopelessly out of
date, you have to compromise, and the obvious compromise in many
of these cases is compulsory licensing.
When you begin this game in areas now protected under copyright,
where the protection already exists and licensing arrangements have
already been made, then I think you are doing something very drastic,
and the ultimate result could be substantial changes in the character of
copyrights that might actually make it harmful to the author rather
than helpful.
Mr. Kastenmeier. Now, I would like to yield to the gentleman from
California, Mr. Wiggins.
Mr. Wiggins. Following you will be many witnesses who will reflect
their economic interests and you may be one of the few witnesses who
do not have an obvious economic stake in this bill.
Can you help me with some of the problem policy issues which may
pervade all of these sections of the bill ? I think I can understand a
person's economic ax. I respect their points of view. But, I am not
sure I really understand the public policy issues involved and I would
like your assistance.
Ms. Ringer. The 1909 Joint Congressional Committee, in its report
No. 2223, made a statement which has been quoted many times and
which I agreed with at one time, but which I have ceased to agree with.
I will paraphrase it. It was that copyright is not for the protection
of the author, but for the public and that where the author's interests
and the public's interests conflict, the author must yield.
This sounds great and for a long time, I felt that this was probably
correct. But, the more I have looked upon the status of authors in this
country and the fact that the public interest is badly served when
authors are badly served, I have felt that too often the'public interest
has been identified with economic users rather than with authors.
In recent years, partly as a result of this whole revision exercise, I
have been trying to gage individual issues in terms of their impact
upon creativity and authorship, which I consider the ultimate public
interest.
The Constitution speaks of the desirability of promoting the prog-
ress of science and useful arts, science in the broad sense of learning or
knowledge, by offering protection for limited times to authors and
inventors.
It seems to me that it is this protection, tlie exclusive rights that are
supposed to be granted to authors, that is the ultimate public interest
that the Constitution and its drafters were thinking about.
117
I do not think that this has ever been fully or even partly realized
in any copyright law we have had in our entire history.
Mr. Wiggins. I was wondering if you would place the dissemination
for the benefit of the public — and I might add for the profit of the
disseminators — on an equal plane with the protection of the authors
and inventors ?
Ms. Ringer. Yes. I think that the system that we have had has been
based on the desire to induce dissemination, make works available
to the public by offering protection to authors.
I think that this system is now subject to some difficulty because of
the fact that the new technology has made it an absolute detriment to
disseminate. In other words, an author in certain situations who lets
the bird out of the cage, finds that there is no way to regain it, that
once he has made a tape and it has been played over the radio or tele-
vision, he finds suddenly it is being pirated or made in duplicates all
over the country.
It is very, very difficult in that situation for him to realize any
economic gain or reward for his creation and there may be situations
in which he would prefer to keep his biid in its cage, so to speak.
I am speaking in terms of music, but I think the example is better
in some areas where there is a more realistic possibility of exercising
complete control.
The task of your committee, as I see it, is to try in some way to
evaluate the impact of the new dissemination media on the basic task
of giving authors a reasonable return and inducing them to let the work
go out to the public.
We are in really big trouble on this, in my opinion, at the moment.
Mr. Wiggins. Thank you.
Thank you, Mr. Chairman.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson ?
Mr. Danielson. I wish to thank Ms. Ringer, JNIr. Lorenz, and
IMr. Kaminstein for their contribution this morning. It was most
helpful.
Will iVIs. Ringer be back again ? I have a couple of questions.
Mr. Kastenmeier. As a matter of fact, yes. We will have Ms. Ringer
back perhaps at an earlier time than later because it is obvious today
we will not have time for extended examination on a number of issues
which have been raised.
Mr. Danielson. All right.
Beyond that, I want to thank my colleague, Mr. Wiggins, for raising
the point he just did raise and for your response to it. It was directly
responsive to one question in my mind. As I read the Constitution, the
justification for copyright in the first place — and the only one in the
Constitution — is to promote the progress of science and useful arts.
So far as I am concerned, any legislation which I will support will
have to be calculated to achieve that end, to promote the progress of
science and useful arts.
The copyright is the means through which that end is accomplished
and that will be, I believe, the general rule that I am going to follow
hei'e.
I wish to thank Mr. Kaminstein and commend him for the magnifi-
cent perception of the legislative process which is set forth in the next
lis
to the last paragraph of his statement, and of the responsibility of the
Congress in meeting that process.
I wish every legisLator would include that as part of his morning
devotions or ablutions.
Mr. Kastenmeier. The gentleman from Massachusetts, Mr. Drinan ?
Mr. Drinan. I want to welcome Ms. Ringer back. I am sorry I had
another subcommittee. That subcommittee was about bankruptcy, and
the Congress has been even more apathetic about bankruptcy than
about copyright laws.
I thank you for your appearance here today and I wish to thank the
other two witnesses.
Thank you.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison?
Mr. Pattison. I have no questions.
Mr. Kastenmeier. I am astounded. [Laughter.]
Probably it is the better pait of wisdom, since the House is in ses-
sion, to terminate at this period and to thank all three witnesses,
Mr. Lorenz, Mr. Kaminstein, and Ms. Ringer, for ilhuninating the
subcommittee and updating it on the subject of copyright.
Particularly what Ms. Ringer has contributed this morning will
raise a number of other issues, other questions, with which I am in
entire agreement with the gentleman from California, Mr. Danielson,
on and suggest further colloquy.
Rather than get into those thickets at this hour, T think we will let
the morning testimony stand. It does sound not only hopeful, but gives
us the frame of reference for now proceeding hopefully to a success-
ful end.
In conclusion the Chair desires to again thank our witnesses this
morning.
Mr. Danielson. Is there any chance of getting a larger room for
tomorrow ? There are a lot of people standing up back there that would
rather sit.
Mr. Kastenmeier. We will do what we can do in that regard. The
committee is very impressed by the public interest. We will try to bring
additional chairs in and accommodate those standing today.
Tomorrow we wnll have representatives of the Justice Department,
Commerce Department, and the State Department on the question of
general copyright revision. Until then, the subcommittee stands
adjourned.
[Whereupon, at 12 :10 p.m., the subcommittee adjourned, to recon-
vene at 10 a.m., Thursday, May 8, 1975.]
COPYRIGHT LAW REVISION
THURSDAY, MAY 8, 1975
House of Represextatives,
Subcommittee on Courts, Civil Liberties,
AND the Administration of Justice
OF the Committee on the Judiciary,
Washington^ D.C.
The subcommittee met, pursuant to call, at 10 :10 a.m. in room 2226,
Rayburn House Office Building, Hon. Robert W. Kastenmeier [chair-
man of the subcommittee] presiding.
Present : RepresentatiA'es Kastenmeier, Danielson, Drinan, Badillo,
Pattison, and Railsback.
Also present : Herbert Fuchs, counsel ; Bruce A. Lehman, counsel ;
and Thomas E. Mooney, associate counsel.
jNIr. Ivastenmeier. The committee will come to order. This morning
is the second morning devoted to hearings on the subject of H.R. 2223
and other bills relating to the general revision of the copyright law.
"We are pleased to have as our first witness this morning, represent-
ing the State Department, Deputy Assistant Secretary for Commercial
Affairs and Business Activities, the Honorable Joel W. Biller. Mr.
Biller is accompanied by Philip R. Trimble, Assistant Legal Adviser
for Economic and Business Affairs.
Is Mr. Biller here ?
Mr. Biller. Yes.
Mr. Kastenmeier. We will be happy to hear what you have to say.
TESTIMONY OF JOEL W. BILLER, SECRETARY FOR COMMERCIAL
AFFAIRS AND BUSINESS ACTIVITIES, DEPARTMENT OF STATE
Mr. Biller. Thank you, ]Mr. Chairman. Mr. Trimble is sitting on
my right and Mr. Bushnell is on my left.
I greatly appreciate having the opportunity to present the views
of the State Department on H.R. 2223, for the General Revision of
the Copyright Law, title 17 of the United States Code, and for other
purposes. Although we take exception to one section in this bill, the
Department otherwise supports the enactment of this important
legislation.
As the committee knows, the present U.S. copyright law is essen-
tially the same as the act of 1909. Since that date, great advances have
been made in teclinology and techniques for communicating printed
matter, visual images, and recorded sounds. These advances have
created new industries and methods for the reproduction and dissemi-
nation of copyrighted works.
(119)
120
The State Department believes that a modernization of the copy-
right law to take into account the important technical advances in
the copyright field is in the interest of both the authors and the users.
My comment will be directed to those sections of H.R. 2223 which
relate to the conduct of our foreign relations and therefore are of
special interest to the Department of State. Tliese sections are the
following: Section 104 regarding subject matters of copyright and
national origin ; section 302 on the duration of protection ; and section
601 on restrictions against importation of certain copyrighted mate-
rials from other countries.
Section 104 is relevant to our international interests in that it speci-
fies the occasions when foreign works, that is, works produced by
nationals of countries other than the United States, will be granted
U.S. copyright protection. Essentially, section 104 continues the reci-
procity approach contained in the present law with respect to pub-
lished works; that is, the United States gives foreign citizens
protection equal to that given by the foreign countiy to U.S. citizens.
It is tlius consistent with generally accepted international practice in
most countries and has the support of the Department.
Of particular relevance to the Department's interests is section 104
(c) ("Subject Matter of Copyright: National Origin") which deals
with the possibility that a foreign government might take action in
the U.S. courts to divest its citizens or authors of rights to their works
or to block publication of their works within the United States. We
do not have any evidence that an action of this nature is likely to occur.
But if it did, it would represent undesirable official interference with
the freedom of individual expression, and we therefore believe that it
should be guarded against.
It is important to note that the international copyright system
embodied in the I^niversal Copyright Convention is intended to
"insure the respect for the rights of the individual and encourage the
development of literature, the sciences, and the arts." These convention
obligations should be kept in mind with respect to any action to
suppress free communication in the United States of ideas and litera-
ture unacceptable to authorities of another member state of the
convention.
We understand that other U.S. Government agencies are drafting
language to accomplish the purpose of section 104(c) in a technically
different manner. We have not reviewed these proposals and there-
fore are unable to express our opinion on them. However, we sup-
port the aim of appropriately drafted legislation that would deny
effect in U.S. courts of a foreign nation's laws or practices designed
to deprive the authors of that country of the rights to publish and
protect their literary and artistic works in the United States. ,
Section 302 deals with the duration of copyright, that is, term of
protection. It is one of the most important, if not the most im]:)ortant
provision in the copyright revision bill. Essentially, section 302(a)
provides for a copyright term of the life of the author plus 50 years
after his death. Such a term of protection would be more in line
with the practice of most countries of the international copyright
community and would also remove a major obstacle to the possible
adherence of the United States to the Berne Convention for the Pro-
tection of Literary and Artistic Works. Our membership in the
121
Berne Convention would facilitate and simplify international copy-
right protection for U.S. nationals. Therefore, we strongly support
the term of copyright protection proposed in section 302.
Section 601 concerns the so-called "manufacturing clause" which is
designed basically to protect the U.S. printing industry. As you know,
this section prohibits the importation into or the distribution within
the United States of English language books authored by U.S. na-
tionals living in the United States, or domiciliaries, unless the copies
are produced in, or are made from type set in, or plates made in, the
United States or Canada.
We are pleased that section 601 would, on the whole, move in the
direction of liberalizing the present manufacturing clause. For ex-
ample, a violation of the manufacturing clause as regards a book
would not ailect tlie right of the copyright proprietor to authorize a
motion picture version or other use of the book. It would merely
affect enforcement of copyrights with respect to publication as a
book. Further, the number of copies manufactured abroad that may be
imported has been increased from 1,500 to 2,000.
Despite this liberalization, however, section 601 would continue
the protectionist features of the manufacturing clause. This kind of
protection is fundamentally inconsistent with basic U.S. policy in
international trade. For several decades we have pursued a policy of
reducing tariffs and nontariff barriers in the interest of promoting an
open international economic system. We believe that the broad trading
interests of tlie United States and its people continue to be the best
serv^ed by a general reduction of trade barriers including nontariff
barriers. This is the policy we are carrying forward in the current
multilateral trade negotiations being undertaken in Geneva under
the authority of the recently enacted Trade Act.
During this round of negotiations attention will be focused par-
ticularly on nontariff barriers, and one of our major negotiating
objectives will be to reduce or eliminate nontariff barriers of other
countries which restrict U.S. trade. We believe that it is important
to note this inconsistency in considering the continuation of the manu-
facturing clause.
Furthermore, the exception for Canada introduced by tliis bill into
the manufacturing clause would violate our obligations under the
GATT and various bilateral treaties. The United Kingdom has pro-
tested and we expect that other foreign countries which are being
discriminated against by this measure will protest, thereby intro-
ducing an element of discord and potential retaliation into our rela-
tions with those countries.
Specifically, Mr. Chairman, the exception would violate our obli-
gations under article XIII of the GATT which requires nondiscrim-
inatory application of quantitative restrictions, and the United States
would be obligated to seek a special waiver from the GATT contract-
ing parties to permit this exception. This procedure would be particu-
larly undesirable at this time in view of the opening of the new
round of multilateral trade negotiations at Geneva. The exception
would also violate commitments in various FCN treaties, which we
have concluded with most of the other industrialized nations.
These treaties normally impose obligations on the United States to
notify and consult before it introduces nontariff barriers on important
57-786— 76— pt. 1 9
122
products of the other country, and forbids the prohibition of the
other country's products unless the product of third countries are
similarly prohibited.
In conclusion, the Department of State believes that the updating
of the U.S. copyright law is most desirable, and we support the enact-
ment of H.Ii. 2223. A modernization of the copyright law to take
into account the important technological advances in the copyright
field is in the interest of all members of the copj^right community. It
is also important in bringing the United States in step in copyright
•with the other principal countries of the world. We hope, Mr. Chair-
man, that the objections to the bill that I have noted will be given
serious consideration by your committee.
Thank you, Mr. Chairman.
Mr. Kastenmeier. Thank you, Mr. Biller. I appreciate your state-
ment and your appearance. In the past, we have had ]Mr. Harvey Win-
ter from time to time representing the De|)artment and we know him
well.
May I ask as to what extent does your Department coordinate its
view with respect to the legislation under consideration with either
the Copyright Office, the Department of Commerce or the Department
of Justice ?
Is there any particular coordination of views with respect to, say,
representing the view of the Administration on the bill?
Mr. BiLT.ER. Yes, Mr. Chairman, I think there is. We maintain daily
contact Avith other agencies on the international aspects of the bill.
We are aware of the views of the other agencies and certainly on an
informal basis there is a great deal of consultation.
Mr. Kastenmeier. You indicated you opposed one section, referring
to the manuf actuiing clause section.
]\fr. Biller. Yes, sir.
Mr. Kastenmeier. But, you indicated a reservation about section
104(c). I wonder whether you could, by using a hypothetical, demon-
strate precisely the effect of that in terms that we would understand.
For example, if country x would insist that copyrights within
its nation were, in fact, state held or state owned it could move in our
forums to represent that state as the holder of a copyright, notwith-
standing the fact that the author we would normally recognize him to
be a different entity than the state. Is that what you're driving at?
Mr. Biller. No ; our position is that we favor the enactment of that
section in order to promote to the maximum the individual freedom
of authors. If a particular author lived in a country whose domes-
tic system required that the government of that country hold the cop}-
right and that author managed to publish his work in the United
States, even though the government of his country was the legal holder
of the copyright, we would favor the enactment of this legislation to
prevent that government from suing in the U.S. courts to prevent the
publication.
Mr. Kastenmeier. I can understand the policy reasons on both sides
of that one. It would be very difficult. I understand the basic motiva-
tion.
How could you expect to have some continued comity with that gov-
ernment with respect to the field of its endeavor ?
Mr. Biller. Well, there are two points I would like to make. First,
we believe that the importance of promoting freedom of thought and
123
the importance of communication across international borders is moi-e
important than some of the other considerations involved. Second,
with regard to some of the countries which have this kind of system, we
have no indication whatsoever that they have any intention of bringing
suit in American courts.
So, we don't believe it is a real problem that we would have. In the
case of the government of the Soviet Union, for example, which has
such a system, we have no indication that they will bring suit in
American courts to prevent the publication in the United States of
works of dissident Soviet authors.
Mr. K.\STENMEiER. I See. It is the policy of the State Department,
notwithstanding the success of the Universal Copyright Convention
and its membership, that we should be in a position to adhere to the
Berne Convention nonetheless ; is that correct ?
Mr. BiLLER. Yes.
Mr. Kastenmeier. In your view, does the passage of this bill, in its
present form, qualify us for entry, for adherence to the Berne
Convention ?
Mr. BiLLER. What it would do, Mr. Chairman, is remove one of the
principal obstacles that noAv exists to our adherence, that being the
term of protection, by extending the term of protection to the lifetime
of the author plus 50 years. That would remove that ob-;tacle because
that is the term provided for in the Berne Convention. There are some
other obstacles which would have to be overcome, but I think it would
be quite possible to work them out.
Mr. Kastenmeeer. Are those obstacles outside of the perimeter of
what the statutes provide for?
IMr. BiLLER. Yes, sir.
Mr. Kastenmeier. You have discussed the term in that connection ?
Is it not the fact that there are one or more countries moving away
from life plus 50 ; is there not at least one major European comitry
that has moved to a longer term than that ?
Mr. BiLLER. I am not aware of it, Mr. Chairman.
Mr. Kastenmeier. As far as you are aware, all the Western Euro-
pean countries have life plus 50 ?
Mr. BiLLER. I believe so.
Mr. Kastenisieier. Perhaps I ought to put it this way, what coun-
tries in the world other than ourselves have a term other than life plus
50?
Mr. BiLLER. I don't have a list of them with me. If you would like,
I can submit such a list for the record.
Mr. Kastenmeier. Thank jou. We would appreciate that.
Thank you very much, for your testimony.
[The material referred to follows :]
A Compilation op National Copyright Duration Standards for Literary,
Musical, and Artistic Works
background
The copyright duration of life of the author plus 50 years was first advanced
as an international standard in the 1908 revision of the Berne Union. Although
this term was not made obligatory at that time, in 1948 the Berne Convention
was amended to make life of the author plus 50 years the minimum term of
duration for members of the Convention. Today the "life plus fifty" standard is
the most widely accepted standard for the duration of copyright protection.
The following list of national copyright durations was compiled from Copv-
right Laws and Treaties of the World or from other more recent sources.
124
Life of the Author plus 50 years (7^ countries)
Argentina ; Australia ; Austria ; Belgium ; Bulgaria ; Burundi ; Cameroon ;
Canada; Central African Republic; Ceylon (Sri Lanka) ; Chad; China, Republic
of; Congo (Brazzaville) ; Costa Rica; Cyprus; Czechoslovakia; Dahomey; Den-
mark ; Ecuador ; Egypt, Arab Republic of ; El Salvador, Republic of ; Ethiopia,
Empire of ; Fiji ; Finland ; France ; Gabon ; German Democratic Republic ;
Greece ; Guatemala ; Holy See ; Hungary ; Iceland ; India ; Indonesia ; Republic
of Ireland; Israel; Italy; Ivory Coast; Japan; Laos; Lebanon; Liechtenstein;
Luxembourg; Madagascar; Mali; Monaco; Morocco; Nepal; Netherlands; New
Zealand ; Niger ; Norway ; Pakistan ; Paraguay ; Peru ; Philippines ; Portugal ;
Rwanda ; San Marino ; Senegal ; Sierra Leone ; Singapore ; South Africa, Repub-
lic of; Sweden; Switzerland; Syrian Arab Republic; Togo; Tunisia; Turkey;
Uganda ; United Kingdom ; Venezuela ; Yugoslavia ; and Zaire.
Xdfe of Author plus 20 years
Poland.
Xife of the Author plus 25 years (IS countries)
Ghana ; Iraq ; Kenya ; Liberia ; Libya ; Malawi ; Malaysia ; Malta ; Mauritius ;
Nigeria; Tanzania, United Republic of; Union of Soviet Socialist Republics;
and Zambia.
-Life of the Author plus 30 years (9 countries)
Bolivia ; Chile ; Dominican Republic ; Iran ; Jordan, Hashemite Kingdom of ;
Korea ; Mexico ; Nicaragua ; and Thailand.
'Life of the Author plus ^0 years
Uruguay.
hife of the Author plus GO years
Brazil.
Life of the Author plus 70 years
Germany, Federal Republic of.
Life of the Author plus 80 years (4 countries)
Colombia ; Cuba ; Panama ; and Spain.
Vai-iable Copyright Term
In the following countries the duration will vary depending on the category
of the author's heirs. In all the countries listed below, an author enjoys copy-
right protection during his lifetime. The term beyond the author's life, however,
is controlled by the nature of the author's heirs. (3 countries) — Albania; Haiti;
and Romania.
Miscellaneous Categories (Unrelated to life of the Author)
Afghanistan — 20 years ; Burma, Union of — 10 years ; Honduras — 10, 15 or 20
years ; and United States — 28 years, renewable for 28 years.
Countries without copyright laws, or for ichich accurate information is unavail-
able
Algeria ; Andorra ; Bahrain ; Barbados ; Botswana ; Cambodia ; China, Peoples
Republic of; Equatorial Guinea; Gambia; Guinea, Republic of: Guyana; Ja-
maica ; Kuwait ; Lesotho ; Maldive Islands ; Mauritania ; Mongolia ; Nauru, Re-
public of ; Saudi Arabia ; Somalia ; Southern Yemen ; Sudan ; Swaziland ; Trinidad
and Tobago ; Upper Volta ; Viet-Nam, Republic of ; Western Samoa ; and Yemen.
Mr. Kastenmeier. I would like to yield to the gentleman from
Illinois.
Mr. Railsback. How serious is the Canadian exception you have
alluded to on page G ; what effect could that have as far as preventing
us from joining the Berne Convention ?
]Mr. BiLLEK. I think the effect on our general trade policy and the
negotiations we are engaged in in Geneva are more serious than the
effect on our joining the Berne Convention.
What the provision does, Mr. Congressman, is introduce a new
element of discrimination, which is quite clear and is patently dis-
criminatory, in our legislation.
125
Mr. Eailsback. The Canadian exception?
Mr. BiLLEK. Yes, sir. This would occur at a period in time where
we are engaged in major initiatives to have other countries reduce or,
hopefully, eliminate their discrimination and nontariff barriers. This
would be adding a discriminatory character to a continuing nontariff
barrier.
Mr. Eailsback. So, now your authors publish not only in this coun-
try, but also in Canada within a 30-day period in order to derive some,
benefits that they otherwise would not have?
Mr. BiLLER. The Canadian exception does not exist now.
Mr. Eailsback. The exception does not exist now?
Mr. BiLLER. It would be introduced by the legislation.
Mr. Eailsback. I guess I am referring to something else ; I am. a
novice in this.
Mr. BiLLER. The 30-day provision is, if a work is published within
30 days of its first publication in the United States, it is deemed to
be published simultaneously in other countries.
Mr. Eailsback. Thank you. I yield my time.
Mr. IvASTENMEiER. The gentleman from* California, Mr. Danielson.
Mr. Danielson. In your statement you used the acronym GATT ;
what does that mean?
Mr. BiLLER. Tliat is the General Agreement on Tariffs and Trade.
Mr. Danielson. I assume that is a treaty of some sort, is that
correct ?
Mr. BiLLER. The General Agreement on Tariffs and Trade, Mr.
Danielson, is a multilateral treaty which we entered into with most
of the major trading comitries of the world in late 1948 by which we
established the rules that establish international trade.
Mr. Danielson. It is a treaty?
Mr. BiLLER. It is an executive agreement, Mr. Danielson, I am told.
Mr. Danielson. What is an FCN?
Mr. BiLLER. FCN stands for Friendship, Commerce, and Naviga-
tion. Treaties of Friendship, Commerce, and Navigation and the stand-
ard types of bilateral treaties which we enter into with other countries
to assure them we will not discriminate against them or their nationals.
Mr. Danielson. Are they uniformly a two-party agreement?
Mr. BiLLER. Yes, they are always bilateral, and they follow the same
nondiscriminatory pattern.
Mr. Danielson. Thank you.
Mr. Kastenmeier. The gentleman from Massachusetts.
Mr. Drinan. I have no questions but I want to thank Mr. Biller. I
would just like to say that I commend him for his testimony and it is
nice to be in agreement with the Department of State from time to
time.
Mr. Kastenmeier. The gentleman from New York.
Mr. Badillo. I just wonder what is the Department's feeling about
other U.S. agencies that are drafting language of their own. Who is
drafting language; I understand there are other agencies drafting
their own language ?
Mr. Biller. The Copyright Office, I believe, has some language of
its own. It is not our intent to cause bureaucratic problems. We want
to make clear that we agree with the language.
Mr. Drinan. But the present language is not acceptable ?
126
]\Ir. BiLLER. No; it is acceptable. But, we would support any alter-
native language if it were to achieve the same objective.
Mr. Kastenisieier. The gentleman from New York, JNIr. Pattison.
Mr. Pattison. I liave no questions.
Mr. Kastenmeier. I have just one. You devoted quite a bit of your
statement to the manufacturing clause. Really, 8 to 10 years ago we
tried to limit tlie effect of it on the theory that eventually it might
well be phased out consistent with national policy.
I am not sanguine about how it presently appears in H.R. 2223. I
rather agree with the thrust of your statement and wonder it if might
be useful for our purposes intermitionally to place a further restric-
tion on that section which would limit the effect of, actually limit the
effect of the manufacturing clause to a term certain, for example, 6
years from date or some other such specific period of time wherein-
after it would no longer have any force or effect'^ Would that not be
helpful to the State Department with respect to its dealings with
Great Britain and otlier countries?
]Mr. BiLLER. Yes. sir. I think it would. AYe fully realize that there
could be a difficulty posed for some American manufacturers if pro-
tection like this, which has existed in legislation for many years, were
suddenly terminated.
If the Congress should decide that in oider to achieve a desirable
transition that some sort of phaseout period is necessary, we would
support such a position.
Mr. Kastenmeier. I thank you, Mr. Biller and your colleagues this
morning.
]Mr. Danielson. May I ask an additional question ?
Mr. Kastenmeier. Certainly.
]Mr. Danieeson. Concerning section 101: (c) I have been puzzling
here. Maybe you can give me a short cut. Does a foreign state have
standing in the U.S. courts to bring the kind of an action contem-
pl ated, on the communities referred to in 101: (c) ?
Mr. Biller. At the present time ?
Mr. Danielson. Yes.
Mr. Biller. Yes, sir.
Mr. Danielson. In another sub of this committee — Mr. Eailsback
was on it, I believe — we have been considering the advisability or the
lack thereof permitting foreign states to bring action in the United
States and you feel it does have that?
Mr. Biller. I don't know, I just wanted to try and clarify it for you.
Mr. Kastenmeier. We appreciate your appearance here this morning
and that of your colleagues. Thank you.
[Witness excused.]
Mr. Kastenmeier. The Chair would like to call upon Deputy Assist-
ant Attorney General Irwin Goldbloom of the Civil Division of the
Department of Justice. Would 3'ou please identify your colleagues for
the committee.
Mr. Goldbloom. On my left is John Murphy and on his left is JMiles
Ryan. On my right is Michael Werth. All of these gentlemen are from
the Justice Department.
Mr. ICastenmeier. I notice that you have a 36-page statement which
you may deliver in its entirety or if you care to, you may summarize.
Mr. Goijjbloom. Thank you.
127
TESTIMONY OF IRWIN GOIDBLOOM, DEPUTY ASSISTANT ATTOR-
NEY GENERAL, CIVIL DIVISION, DEPARTMENT OF JUSTICE
Mr. GoLDBLooM. Mr. Chairman, I am pleased to respond to the
conmiittees invitation to present the views of the Department of
Justice on H.K. 2223, a bill for the general revision of the copyright
law, title 17 of the United States Code, and for other purposes.
We are in sympathy with the general purpose of title I of the bill, to
provide a thorough revision and updating of the copyright law, title
17, United States Code. However, as set out below, we reconmiend
certain modifications in the proposed revision. We oppose title II
of the bill which creates a new type of intellectual property, a hybrid
between a copyright and a design patent.
H.R. 2223 and its companion bill, S. 22, are nearly identical with
S. 1361 as passed by the Senate in tlie 93d Congress on September 0,
1974. There are, however, technical and perfecting amenchnents and
changes required by the enactment of Public Law 93-573, providing
for interim copyright extension and increased penalties for tape piracy.
A section-by-section analysis of S. 13G1 is part of Senate Ileport Xo.
93-983, 93d Congress, at pages 102 to 228. Further details as to the
history of this copyright revision bill appear in the same report at
pages 101 to 103. The summary below is specifically directed to fea-
tures of the Bill of particular concern to this Dei>artment.
Section 107 relates to the "fair use" doctrine. This is fully dis-
cussed in Senate Report No. 93-983, pages 115 to 120. The scope of fair
use in copying is illustrated to include reproduction by a teacher
or a student of a small part of work to illustrate a lesson (S. Report
93-983, p. 115).
This example, therefore, does not include reproduction of the
entire work to illustrate a lesson. In determining whether the use made
of a work in a particular case is a fair use, a court is to consider as
factors the purpose and character of the use, the nature of the copy-
righted work, the amount and substantiality of the portion used in re-
lation to the co])yrighted work as a whole, and the effect of the use
upon the potential market for or value of the copyrighted work.
As to the reproduction of entire works for classroom use, the doc-
trine of fair use would be applied "strictly" (S. Report, 93-983. p. 117) .
Sections 108, 110, and 111 cover exemption from liability for copy-
right infringement in the fields of library and archive reproduction
(sertion 108V the exemption of certain performances and displays,
such as in classrooms in face-to-face teaching activities of a_ non-
profit educatioual institution (section 110) and the retransmission
of a primary transmission simultaneously with the primary trans-
mission or nonsimultaneously with the -primary transmission if by
a "cable system" outside defined geographic areas ("secondary trans-
missions" of section 111) .
Section 302 establishes a new term for the duration of roDyright.
Crenerally, this is for a term consisting of the life of the author and
50 years after his death. In the case of joint works, the period of 50
years commences upon the death of the last surviving author. For
finonymous works, pseudonymous works, and works made for hire,
the copyright period is for a term of 75 years from the year of its
128
first publication, or a term of 100 years from the year of its creation,
whichever expires first.
Where one or more authors are identified for an anonymous or
pseudonymous work before the end of the copyright term, the longer
period of copyright terminating 50 years after the death of the author
then applies.
Section 405 deals with the effect of the omission of the copyright
notice. Section 411 covers infringement actions in certain situations.
Section 506 contains special provisions applying to persons who
infringe willfully and for purposes of commercial advantage. With
respect to copyright in a sound recording, for the first such offense, a
person is fined not more than $25,000 or imprisoned not more than
1 5'ear, or both.
For any subsequent offense, a person is fined not more than $50,000
or imprisoned not more than 2 years, or both. Section 507 provides a
3-year statute of limitations for both criminal proceeding-s pursuant
to provisions of the bill after the cause of action arose, under the
provisions of Section 116 and 506 and for civil actions after the claim
accrued.
Section 601 affords preferential protection to publishers and print-
ers of the United States and Canada, Report 93-983, pp. 195-200.
Sections 801-809 are concerned with the Register's duties to col-
lect royalties and make determinations concerning the adjustment
of copyright royalty rates for certain uses where compulsory licenses
are provided by the bill.
They also relate to his duties to determine in certain circumstances
the distribution of these royalties deposited with the Register of Copy-
rights. Section 803 provides for selection of membership of the tri-
bunal to make necessary detenninations with respect to royalty mat-
ters, to be on the basis of a list of names furnished by the American
Arbitration Association to the Register of Copyrights. Section 804
provides for procedures to be followed by the tribunal in making its
determinations. Subsection (e) of section 804 directs that the tri-
bunal shall render a final decision in each proceeding within 1 year
from the certification of the panel, certified by the Register of Copy-
rights on the basis of the names furnished by the American Arbitra-
tion Association. This subsection further provides that the Senate
Committee on the Judiciary and the House of Representatives Com-
mittee on the Judiciary, upon showing of good cause, inay waive this
requirement of the rendering of a final decision within 1 j^ear from the
certification of the panel in a particular proceeding.
The judicial review for tribunal final determinations, provided in
section 809 (concerning the distribution of royalty fees), is limited.
A court may vacate, modify or correct such a determination if it was
procured by corruption, fraud or undue means, where a member of the
panel was guilty of misconduct by which the rights of anj^ party were
prejudiced.
Provisions for the protection of ornamental designs of useful articles
appear in title II of the bill. Section 201 provides that authors or
proprietors of an original ornamental design of a useful article may
secure a period of protection, except for certain subject areas set out
in section 202, for a period provided in section 205. Section 201 con-
129
tains definitions of the terms "useful article", "design of a useful
article", "ornamental" and "original" as needed for purposes of the
particular protection provided by this title. Section 204 provides that
protection commences on the date when the design is first made pub-
lic, either by being exhibited, publicly distributed, or offered for sale
or sold to the public. Section 205 provides that the term of protection
extends for 5 years, subject to being renewed for an additional 5 years
prior to the expiration of the initial term. Section 206 provides for cer-
tain design notices to be applied to the products protected, and section
207 limits recovery for infringement if the design notice requirement
of section 206 have been omitted-
However, actual notice of design protection to a particular per-
son can take the place of the design notice requirement of section 206.
Section 209 of title II provides for loss of protection if registration
of the design is not macle within 6 months after the date on which
the design was first made public, who may make application for re-
newal registration of a design protected imder the bill, how and under
what conditions and with what supporting papers a design protected
under the bill can be renewed.
Section 212 of title II deals with the examination of the design
application and provides for cancellation of registrations on applica-
tion of a person who believes he is or will be damaged by a registra-
tion under this title. Grounds for cancellation are that the design
is not subject to protection under the provisions of the title.
Section 220 of title II provides remedies for infringement of a de-
sign protected under this title. It provides for a civil action to have
judicial review of a final refusal of the Administrator to register the
design as for infringement if commenced within a time period speci-
fied by the Administrator of the title, but not less than 60 days after
the decision, and permits simultaneous remedy for infringement by
the same action if the court adjudges the design subject to protection
under this title. This would appear to mean that the infringer would
liave to be joined as a party defendant with the Administrator of
this title. The requirements for such an action are that the design
proprietor has filed and prosecuted to final refusal an application
for registration of the design, a copy of the complaint in the action
is delivered to the Administrator within 10 days after commencement
of the action, and the defendant has committed acts which would con-
stitute infringement of the design.
Section 221 of title II gives courts jurisdiction of actions under this
title and authority to grant injunctions to prevent infringement, in-
cluding temporary restraining orders and preliminary injunctions.
Section 222 of title II relates to recover}^ of infringement, setting
maxunum amounts of recovery per infringing copy by way of com-
pensation and provides for the delivery for destruction or other dis-
position of any infringing articles.
Section 223 of title II provides for cancellation of a registration of a
design by a court and certification by the court of such order to the
Administrator.
Section 227 of title II provides that copyright protection under title
I, when utilized in an original ornamental design of a useful article,
may still be a design work eligible for protection under the provisions
of this title.
130
The issnance of a design patent for an ornamental desi^'n for an ar-
ticle of manufacture under the patent laws, title 35 United States
Code, terminates any protection of the desian under this title.
Section 229 of title II provides that nothing in this title amiuls or
limits common law or other rights or remedies available to a person
with respect to a design which has not been made public as provided
in this title or any trademark right or right to be protected against
unfair competition.
Section 232 of title II amends various other statutes. Of particular
importance to the Departuicnt is the revision proposed for title 28.
United States Code, § 1498 (a) to provide that whenever a registered
design or invention is used or manufactured by or for the United
States without license of the owner thereof, the owner's remedy shall
be by action against the United States in the Court of Claims for recov-
ery of reasonable and entire compensation. Use or manufacture of
a registered design or invention by a conti-actor, subcontractor or any
person, firm or corporation for the Government and with the author-
ization or consent of the Government is to be construed as use or manu-
facture by or for the United States.
Use or manufacture by or for the United States of any article owned,
leased, used by or in the possession of the United States prior to, in the
case of an invention, July 1, 1918, and for registered designs, prior
to July 1, 1978, is not to be the basis of an award under this section.
Government employees have the right to sue the Government under
this section except when in the position to order, influence or induce use
of the registered design or invention by the Govermnent.
Further excluded as a basis for claim under this section are claims by
a registrant or patentee or assignee thereof when the design or inven-
tion was related to the official functions of the employee, in cases in
which such functions included research and development, or in mak-
ing of which Government time, materials or facilities were used.
Section 233 provides that title II of the bill shall take effect 1 year
after enactment of this act.
Section 234 precludes a retroactive effect for the provisions of the
design protection of the bill.
Section 106 states generally the basic rights of copyright owners.
Following sections of the same chapter set forth limitations and excep-
tions to those rights. The public interest in the promotion of education
and scholarly pursuits calls for a careful consideration of such circum-
stances as may impede the dissemination of knowledge. In this regard,
section 107 of the bill, dealing with "fair use" of copyrighted informa-
tion, leaves unclear the extent to which librarians can reproduce works
for use in libraries.
It would seem in the public interest to work an accommodation be-
tween the copyright and such reproduction. But, as a doctrine applied
on a case-by-case basis, "fair use" renders it uncertain whether, with-
out infringement, librarians or library patrons can make copies of
library materials for the patrons' use. Because of the advantages of the
economical and speedy means of reproduction now available in li-
braries, it would be socially desirable not to discourage use thereof
by uncertainty over the extent of the "fair use" doctrine.
Thus, we strongly believe that a definition in the bill of the doc-
trine as applied to such reproduction in libraries is definitely needed.
131
Moreover, defining the meaning of "fair use" in tliis connection also
could serve to reduce uncompensated infringement. To carry out our
suggestion to give maximum certainty as to "what is a fair use," and
give more meaningful scope to the exemptions from copyright liability
of section 108 discussed below, we suggest the following changes : Sec-
tion 107, last line, p. 9, line 9, change "work" to
"work; provided that nothing contained in this section shall be con-
strued to limit the use by reproduction in whole or in part in copies
or phonorecords or by other means specified in section 106 whenever
used in nonprofit educational activities."
Eeason : Clarity of scope of fair use for educational activities.
Section 108(d), lines 5-6, p. 10, lines 1, 2, delete "of a small part".
Reason: Libraries should be able to reproduce entire work for
scholarship.
Section 108(e). lines 4-7, p. 10, lines 13-16, delete "if the library or
archives has * * * at a fair price,"
Reason : Too difficult and cumbersome to make purchase investiga-
tion ; discourages use.
Section 108, in subsection (a), provides that it shall not infringe a
copyright for a library or archives to reproduce or distribute no more
than one copy or phonorecord of a work under conditions specified in
subsequent parts of the section. These conditions require, among other
things, that the reproduction or distribution be made without any
purpose of commercial advantage and that the collections of the li-
brary or archives involved be open to the public or available to spe-
cialized researchers, whether or not affiliated with the libraiy or ar-
chives involved or with the institution of which the libraiy or archives
is a part. Under subsection (b), the rights of reproduction and dis-
tribution free from liability would apply to a copy or phonorecord of
an unpublished work duplicated in facsimile solely for preservation
and security or for deposit for research use in a library or archives
of the type covered by the section.
Under subsection (c), the exemption from infringement would ap-
ply to a duplication in facsimile of a published work solely for re-
placement of a copy or phonorecord that is damaged, deteriorating,
lost or stolen, if after reasonable eifort it has been determined that an
unused replacement cannot be obtained at a fair price.
The rights of reproduction and distriJxition under section 108 ex-
tend to the isolated and unrelated reproduction or distribution of a
single cop3'^ or phonorecord of either a published or unpublished work
on separate occasions unless the library or archives is aware or has
substantial reason to believe that it is engaging in a related or con-
certed reproductioji or distribution or engages in a systematic repro-
duction or distribution of a copy of an item forming part of a copy-
righted collection or periodical issue or of a copy or phonorecord of a
small part of any other copyrighted work.
As we read this provision, it will not prevent libraries and archives
from reproducing works in machine-readalDle language in connection
with the storage and use of computerized information systems. "VVe
hope that the House legislative history of the bill will clearly support
this construction, for the storage and use of data in such systems is of
great importance to repositories and sources of scholarly research ma-
terial. To impose copyright liability impeding the storage of such
132
'data would be socially undesirable. If our interpretation of section
108 is wrong, we recommend that the section be changed to extend the
applicable exemption to reproduction in machine-readable language
for storage and use in information systems.
The ease of transfer of computerized data is another area in which
H.R. 2223 raises a problem. Universities, research agencies, govern-
ment, and private industry are developing information networks using
computers and other electronic equipment to speed the transfer of
information from source to user.
H.R. 2223 does not provide a method by means of which informa-
tion systems users can easily obtain the permission of copyright own-
ers for use of their material. The difficulty and loss of time entailed in
many cases in contacting owners may inliibit users from including
material in their systems. Or users may be unable to employ material
in their systems in sufficient time in situations where speed is essen-
tial. It would appear in the public interest for the bill to contain some
guarantee that information systems which are willing to pay royalties
for material used can obtain easier access to copyrighted information,
at least in high-priority areas such as scientific and technological
works.
The proposed legislation also leaves unclear at what point in the
use of computerized copyrighted material the liability for royalty
payment attaches. Under H.R. 2223, it would seem that placing copy-
righted data into a computer (which may form part of an information
system) might infringe the copyright. Since the use of computers for
storage and retrieval of information to some extent may replace the
sale of books, in most cases the payment of royalties should be re-
quired. However, just where in the process the royalty payment should
be assessed, is open to question. We believe it unwise to levy a "toll"
at the "input" stage in the process. Levying on the "input" into com-
puters could impede the development of information systems and may
render meaningless any exemption for the use of computerized in-
formation for educational purposes which may be read into H.R. 2223.
The subject of the application of copyright to commimity antenna
television has presented considerable difficulty in previous drafts of
proposed revisions of the Copyright Code. H.R. 2223 attempts a com-
promise between the extreme positions of complete liability for in-
fringement of copyright by secondary transmission by CATV on one
hand, and almost complete freedom from liability on the other hand.
While we support the imposition of a degree of liability upon CATV,
we believe that H.R. 2223 should provide an area of free use for such
systems within tlie local service area.
The first part of subsection (c) of section 111 provides for compul-
sory licensing of secondarj'^ transmissions of a primary transmission
by an FCC-licensed broadcast station upon compliance witli the notice
of ownership and the payment provisions of subsection (d), and (A)
the signals of the primary transmission are exclusively aural and the
secondary transmission is permissible under the rules, regulations, or
authorizations of the FCC; (B) where the CxlTV system is, in whole
or in part, within the local service area of the primary transmitter ; or
(C) where carriage of the signals comprising the secondary transmis-
sion is permissible under the FCC rules, regulations, or authoriza-
tions. We strongly urge, with respect to (B), that the secondai-y
133
transmittal should be completely free of liability ; hence, royalty-free
or no licensing would be in order. The secondary transmission in such
a situation, where the CATV system is, in whole, or in part, within the
local service area of the primary transmitter, finds the cable system
only filling gaps or improving reception in the service area of the
primary transmitter, supplementing the primary transmission. Such
transmission does not impair the primary transmitter's market; in
fact, it enhances it. The copyright holder is helped and not hurt by such
activity.
Section 203 and section 304(c) (6) (D) concern the termination of
transfei*s and licenses. These sections would permit the author or his
heirs to terminate the original transfer of his rights at any time
during a period of 5 years beginning at the end of a specified time.
However, section 203(b) (4) and parallel section 304(0) (6) (D), relat-
ing to transfers of copyrights subsisting after January 1, 1977,
provide that an agreement to transfer rights subsequent to the termina-
tion of a prior transfer will not be valid vmless made after the effective
date of that termination or miless made to the original grantee or his
successor in title.
We do not believe that the grantee or his successor should be in a
preferred position to enter into an agreement for transfer prior to
termination of the original transfer. We see no reason why all poten-
tial transferees should not have an equal opportunity to enter into
such an agreement. It is therefore suggested that subparagraph (4) of
section 203(b) and subparagraph (D) of section 304(c) (6) be deleted.
Section 302 substantially lengthens the time of copyright protec-
tion Avhen compared with the duration of copyright in works under
the present copyright law. At the present time, protection is granted
for 28 years from the date of publication and may be renewed for a
second 28 years, making a total potential term of 56 years in all cases.
U.S. patents for any new and useful process, machine, manufacture or
composition of matter or improvement thereof, are granted for a term
of 17 years (35 U.S-C. 154). Patents for new, original, and ornamental
designs of articles of manufacture are granted for a period up to
14 years (35U.S.C. 173).
Patents for plants are granted for the same length of term as for
new and useful processes, machines, manufacture or composition of
matter (35 U.S.C, 161). Under the proposed bill, an author would
receive a copyright for his life and 50 years after his death. Consider-
ing the average life expectancy of people today, this will double the
length of copyright when compared with the present one for many
works.
For anonymous works, pseudonymous works, and works made for
hire, the term is somewhat less, but still significantly greater than
provided by the present statute.
Senate report No. 93-983, pages 167-173, discusses various con-
siderations for the duration of copyright in works. A major argument
for increasing the term of copyright appears to be that the extension
conforms with foreign laws which provide for longer terms of copy-
right than the present U.S. law. This argument is presented in the
Senate today.
However, we do not believe that this should be the criterion for the
proper length of copyright protection in the United States.
134
Under the Constitution, article 1, section 8, the purpose of a copy-
right is to promote the progress of science and useful arts by securing,
for limited times, to authors and inventors the exclusive riglit to their
respective writings and discoveries .While it may be urged that a copy-
right term of 28 years plus an additional 28 years might be insufficient
to protect the interests of an author in his writings in view of the
lengthening of the ordinary lifespan in modern times, the proposed
bill, by its extended duration of the copyright term, appears to carry
the protection far beyond the contemplation of the framers of the
Constitution.
As an alternative, we propose to proxdde for the lengthening of the
term of the copyright duration to be at least coextensive with the life-
time of the author. In this way, the author will be insured protection
of his work for at least as long as he may live. Thus, we propose the
substitution of an alternative provision to section 302(a), as follows:
(a) In general, copyright in a work created on or after January 1,
1977, subsists from its creation, and except as provided by the follow-
ing subsections, endures for a term consisting of 56 yeare or the life
of the author, whichever is greater.
A conforming amendment should also be made in section 302(b).
The provisions of section 302(c) should be modified to limit the dura-
tion of anonymous works, pseudonymous works, and works made for
hire, to a period of 56 years from the year of their creation or first
publication.
Our proposal would carry out the constitutional concept of
promoting the progress of science and useful arts. A 56-year copy-
right term, as may be extended by the lifetime of the author, is
believed more than adequate to promote this constitutional purpose.
It has also been urged that growth in communications m.edia has
lengthened the commercial life of many works. This does not justify
lengthening the term of a copyright beyond 56 vears or the lifetime
of the author because a lengthened commercial life is not necessarily
consistent with the basic constitutional purpose.
The basic question with respect to copyright duration to be an-
swered by the Congress is whether a doubling of the present copvriglit
term for many works is desirable to promote the progress of science
and useful arts. Other forms of Federal protection for creative works,
such as patents for useful devices, plants, and designs, are all for pe-
riods of no more than 17 years. Copyrights in writings are already in a
preferred position. We do not believe that the promotion of the prog-
ress of science and useful arts requires a doubling of the possible 56-
year copyright period. Our alternative proposal would accommodate
such valid concerns as may exist regarding the present law and, at
the same time, carry out constitutional goals.
Section 405 deals with the effect of omission of the copyright notice.
Under the present act, omission of notice on published copies of a
work ordinarily^ places the work in the public domain (17 U.S.C.
§ 21) . However, if such notice is accidentally omitted from a particular
copy or copies, copyright is not lost; but innocent infrinirei-s who are
misled by the accidental omission are not liable for infringement.
Under section 405 of the bill, omission of notice from "a relatively
smallnumber" of copies or phonorecords publicly distributed will not
invalidate the copyright whether or not such omission was accidental.
135
IVIoreover, the omission of notice will not invalidate the copyright
in a work if registration for the work is made within 5 years after
the publication without notice and a reasonable effort is made to add
notice to all copies or phonorecords distributed to the public in the
United States after the omission is discovered.
As under the present law, innocent infringers who are misled by
the omission of notice woidd not be liable in actual or statutory dam-
ages for infringement. But under H.R. 2223, they might have to sur-
render profits gained through the infringement and be subject to
injunction or payment of a reasonable license fee for continuing their
activity (section 405 (b)). These provisions would delete from 17
U.S.C. § 21 the provision that no permanent injunction shall be had
unless the proprietor of the copyright shall reimburse the innocent
infringer his reasonable outlay innocently incurred if the court, in
its discretion, shall so direct.
A copyright should be protected from invalidation only when the
failure to provide notice was tlie result of an accident or mistake or in
violation of the copyright owner's written requirement that, as a
condition of authorization of public distribution, the copies or phono-
records bear the prescribed notice, and distribution of only a small
number of such items has been made to the public. To permit, as
proposed in section 405, a copyright owner to issue an entire publication
of his work without notice and yet enforce the copyright tends to negate
tlie purpose of notice. Although iniiocent infringers would incur no
liability, they would still have to establish their innocence even where
the omission was deliberate in many cases. We suggest that the sec-
tion specifically be limited to the eliect of omission of the copyright
notice by accident or mistake.
We also believe it advisable that the words "particular copy or
copies," contained in the present statute, be used instead of the broader
and more general words "a relatively small number," found in section
405, to designate the limits within which notice may be omitted with-
out loss of copyright. And we think the discretion in the court to
order reimbursement to the innocent infringer should be retained.
Subject to specified exceptions, section 601 provides that the impor-
tation into or public distribution in the United States of more than
2,000 copies of a work consisting preponderantly of nondramatic
literary material in English by an American or i-esident alien author
and protected under the Copyright Code is prohibited, unless the por-
tions consisting of such material have been manufactured in the
United States or Canada.
This section would reenact in modified form a previous, highly pro-
tectionist nontariff trade barrier (17 U.S.C. §§ 16, 197). We do not be-
lieve that there is either a necessity or desirability for such a provision
which creates an absolute bar to certain books published abroad.
Section 601 is entirelv uni-elated to questions of copvright. It does
not protect authors at all. On the contrary, section 601 decreases the
value of copvrights hy preventing an American author from grant-
ing worldwide publication rights to an English publisher who offei's
more favorable compensation than an American publisher. WhAtever
the merits of the original "infant industry" justificaton for the manu-
facturing clause, the restriction is clearlv unnecessary and inappropri-
ate today in light of the strength and success of our industry and in
136
light of our Nation's coinniitment to eliminate nontariff barriers to
international trade and insure vigorous competition.
For these reasons, section 601 should be stricken from the bill, and
the manufacturing clause should be elmiinated from our copyright
law.
With respect to the Department's antipiracy program in the sound
recording field, we note the following as areas where amendments are
desirable :
Section 506 should be amended to provide for forfeiture of infring-
ing articles in criminal cases resulting in convictions, and a new sec-
tion should be added to provide for summary and judicial forfeitures
in criminal cases.
At present, the Government has no clear-cut authority to destroy
infringing articles which have been seized or otherwise obtained in
the investigation or prosecution of a tape piracy case or, for that mat-
ter, any criminal copyright infringement case. This lack of specific
authority has resulted in critical storage problems for many FBI
and U.S. marshals' offices throughout the country and poses the em-
barrassing possibility that the Government may be ordered to return
known infringing articles tt) a convicted defendant.
With proper amendments, H.R. 2223 could eliminate this most seri-
ous problem. ^Ye strongly urge the following revisions :
1. There should be abided to section 506 a new subsection which
should be designated as :
(b) When any person is convicted of any violation of subsection (a), the court
in its judgment of conviction shall, in addition to the penalty therein prescribed,
order the forfeiture and destruction or other disposition of all infringing copies
or phonorecords and all implements, devices, equipment or other articles of what-
ever kind used or intended to be used in the manufacture, use, or sale of such
infringing copies or phonorecords.
Present subsections (b), (c), and (d) need to be redesignated as
subsections (c), (d),and (e), respectively.
A conforming amendment should be made to title 18, United States
Code, section 2318, so that it reads as follows :
2318.
(a) (present section 2318)
(b) When any person is convicted of any violation of subsection (a) ,
the court in its judgment of conviction shall, in addition to the penalty
therein prescribed, order the forfeiture and destruction or other dis-
position of all counterfeit labels and all articles to which counterfeit
labels have been affixed or which were intended to have had such labels
affixed.
(c) Except to the extent they are inconsistent with the provisions of
this title, all provisions of section (new forfeiture section decribed be-
low), title 17, United States Code, are applicable to violations of sub-
section (a).
2. A new section should be added reading as follows :
(a) All copies or phonorecords manufactured, reproduced, distrib-
uted, sold, or otherwise used, intended for use, or possessed with in-
tent to use in violation of section 506(a), and all plates, molds, mat-
rices, masters, tapes, film negatives, or other articles by means of wliich
such copies or phonorecords may be reproduced, and all electronic, me-
chanical, or other devices for manufacturing, reproducing, assemblings
137
using, transporting, distributing, or selling such copies or phono-
records may be seized and forfeited to the United States.
(b) All provisions of law relating to (1) the seizure, summary and
judicial forfeiture, and condemnation of vessels, vehicles, merchandise,
and baggage for violations of the customs laws contained in title 19,
United States Code, (2) the disposition of such vessels, vehicles,
merchandise, and baggage or the proceeds from the sale thereof, (3)
the remission or mitigation of such forfeiture, (4) the compromise of
claims, and (5) the award of compensation to informers in respect
of such forfeitures, shall apply to seizures and forfeitures incurred,
or alleged to have been incurred, under the provisions of this section,
insofar as applicable and not inconsistent with the provisions of this
section; except that such duties as are imposed upon the collector of
customs or any other person with respect to the seizure and forfeiture
of vessels, vehicles, merchandise, and baggage under the provisions
of the customs laws contained in title 19 of the United States Code
shall be performed with respect to seizure and forfeiture of all articles
described in subsection (a) by such officers, agents, or other persons as
may be authorized or designated for that purpose by the Attorney
General.
Proposed section 114 should be amended to provide for the copy-
right owner of a sound recording to have the right to make derivative
works or it should be amended to clarify that persons other than the
copyright owner do not have such a right absent consent of the copy-
right owner, notwithstanding the fact that the sound recording
copyright owner would have no such right.
Section 114 limits the specific rights of a sound recording copyright
owner to those granted to copyright owners by parts (1) and (3) of
section 106. That is, sound recording copyright owners have the right :
( 1 ) To reproduce the copyrighted work in copies or phonorecords ;
and
(3) To distribute copies, et cetera.
The right to prepare derivative works based on the copyrighted
work (part (2) of section 106) is withheld from a soimd recording
copyright owner despite section 103 which states that such works are
copyrightable and despite the fact that sound recording copyright
owners are entitled to make and copyright derivative works under
present law, 17 U.S.C. § 7. There is a real possibility that an unauthor-
ized duplicator who made a "derivative" work by slightly altering
the original copyrighted sound recording would claim that he did so
legally since the copyright owner is given no exclusive right to make
derivative works.
This potential legal problem could be eliminated by including part
(2) of section 106 in the list in section 114 of exclusive rights granted
to a sound recording copyright owner — an action which would grant
to sound recording copyright owners no more rights than they
presently possess.
Section 506 should be amended accordingly to include part (2) of
section 106.
A third area for concern is proposed section 301 (pages 32-33),
subparagraph (b) , which states :
Nothing in this title annuls or limits any rights or remedies under
the common law or statutes of any State with respect to :
57-786— 76— pt. 1 10
138
(3) Activities violating rights that are not equivalent to any of the
exclusive rights within the general scope of copyright * * * includ-
ing breaches of contract, breaches of trust, invasion of privacy, defa-
mation, and deceptive trade practices * * *
We believe this langTiage could be read as abrogating the antipiracy
laws now existing in 29 States relating to pre-February 15, 1972,
sound recordings on the grounds that these statutes proscribe activities
violating rights "equivalent to * * * the exclusive rights within the
general scope of copyright * * *." .
Certainly such a result cannot have been intended for it would
likely affect the immediate resurgence of piracy of pre-February 15,
1972, sound recordings. [Note : In any event, there would be no effect
on sound recordings produced after February 15, 1972, since it would
appear that the States cannot constitutionally enforce their antipiracy
laws against the unauthorized duplication of these later recordings.]
We therefore urge that section 301 (b) be amended to include a new
subsection (4) as follows:
(4) Sound recordings fixed prior to February 15. 1972.
Proposed section 506(a) should be amended to correct the disparity
of sanctions between second-time infringers of sound recording and
motion picture copyrights and second-time infringers of other
copyrights. ^
As written, section 506(a) provides for a maximum $10,000 fine and
3 years imprisonment for second-time infringers of all copyrights but
sound recording and motion picture copyrights. Infringers of these
latter two categories are subject, upon conviction of a seco]id offense,
to a maximum fine of $50,000 and 2 years imprisonment. We suggest
that these latter infringements are sufficiently serious to warrant at
least the same maximum imprisonment for second offenders as is ap-
plicable to second-time infringers of other copyrights, as well as the
larger fine. The term of imprisonment prescribed should therefore be
at least 3 years.
We siTpport the substitution of "for purposes of commercial advan-
tage or private financial gain" for the present recjuirement in 17
U.S.C. 104 that, to be criminal, infringements must be done "for
profit." The provision in present section 104 for aiders and abettors
kas been removed, but these individuals will be liable to prosecution
under 18 U.S.C. 2.
From the standpoint of making deterrents meaningful beyond the
financial deterrent and provide a penalty for those who can "take"
financial losses as a cost of business, it is recommended that a maxi-
mum 1-year term of imprisonment be included in the sanctions under
proposed sections 116(d) and 506(b), (c), and (d), all of which
are provisions the Department supports.
We also note that section 115, subparagraph (a) (1) , states explicitly
and with clarity what four courts of appeals have ruled is the scope
of compulsory licensing under present law, namely, that absent au-
thorization by the owner of a composition copyright, the duplication of
a sound recording embodying a copyrighted musical composition is an
infringement of the composition copyright even though the duplicator
tenders royalty payments and otherwise attempts to comply with
present compulsory licensing provisions. This is contained in the final
sentence of subparagraph (a)(1), which reads :
139
A person may not obtain a compulsory license for nse of the (non-
dramatic musical) work in the duplication of a sound recording made
by another.
Since this prohibition is not limited to copyrighted sound recordings,
the etlect is to prevent the operation of the compulsory license mecha-
nism for making copies of any sound recordings embodying copy-
righted musical compositions. The Department wholeheartedly
supports this provision.
Section 804 deals with procedures before the tribunal which deter-
mine adjustment of copyright royalties and their distribution under
specifiecl sections of the bill. We object to the provision in subsection
(e) of this section that the Senate Committee on the Judiciary and
the House of Representatives Committee on the Judiciary may waive a
requirement tliat a final decision in each proceeding be rendered by
the tribunal within 1 year from the certification of the panel by the
Register of Copyrights.
The constitutional division of duties among the three principal
branches of the Governm.ent places in the Congress the legislative re-
sponsibilities. However, once a law has been enacted, it is for the execu-
tive branch to carry out the intents and purposes of the law as directed
by the Congress. In our view, legislation, once enacted, should not be
modified or waived by actions of a committee of the Congress. It is
suggested that if waiver of the 1-year requirement is desirable under
particular circumstances, these circumstances be generally outlined in
the bill and that the tribunal be given authority upon good cause
shown to extend the period of time for rendering decisions.
Of particular concern to this Department is the new form of copy-
right protection provided by title II of the bill.
This new form of protection is a hybrid between design patents, 35
U.S.C. 171-173, issued for a period of up to 14 years by the Patent
Office for new, original and ornamental designs of articles of manu-
facture and the copj-right laws which provide for registration and
issuance of certificates of copyrights for the writings of authors. The
new protection that is provided under the bill is not presently avail-
able under the copyright laws and can only be obtained through a de-
sign patent after an examination procedure which determines whether
the ornamental design meets the criteria of patentability, including
unobviousness in view of the prior art, as provided by 35 U.S.C. 102,
103.
While the protection period as proposed for the new type of orna-
mental design protection is only a maximum of 10 years as compared
with the maximum of 14 years available for a design patent, it is
granted without the need of meeting the novelty and unobviousness
requirements of the patent statute.
A threshold consideration before finding that the needs are such
that this new type of protection should be available is whether the
benefits to the public of such protection outweigh the burdens. We
believe that insufficient need has been shown to date to justify removing
from the public domain and possible use by others of the rioflits and
lienefits proposed under the present bill for such ornamental designs.
We beliove that design patents, as are granted today, are as far as
the public should .q-o to grant exclusive rights for ornamental designs
of useful articles in the absence of an adequate showing that the new
140
protection will provide substantial benefits to the general public
which outweigh removing such designs from free public use.
While it has been said that the examination procedure in the Patent
Office results in serious delays in the issuance of a design patent so as to
be a significant problem and damaging to "inventors'' of ornamental
designs of useful articles, the desirable free use of designs which do not
rise to patentable invention of ornamental designs of useful articles
are believed to be paramount.
If the contribution made to the public by the creation of an orna-
mental design of a useful article is insufficient to rise to patentable
novelty, the design should not be protected by the law. The Depart-
ment of Justice has consistently opposed legislation of this character.
To omit Federal statutory protection for the form of a useful object
is not to deny the originator of that form any remedy whatsoever. If
he can prove that competitors are passing off their goods as the
originator's by copying the product's design, he may bring an unfair
competition action against such copyists. Crescent Tool Go. v. KWborn
& Bishop Co., 247 Fed. 299 (C. A. 2 1917). See, also. Sears, Roehuch
(£' Go. V. Stiff el Co., 376 U.S. 225 (1964), and Gompco Corp. v. Day-
Brite Lighting, Inc., 376 U.S. 234 ( 1964) .
Quite apart from our opposition to the merits of title II, we also
oppose enactment of the design protection provisions of this bill which
would provide a new class of actions against the United States since the
bill proposes to amend section 1498(a) to add the new type of design
copyrights to the remedies available to inventors against the United
States who have been issued U.S. patents when they are used by the
United States without authorization of the owner.
For example, by amending section 1498 (a) in this waj^, the Congress
will be creating a completely new problem area fraught with difficulties
for Government procurement.
Government contractors who "reverse engineer" alleged trade secrets
in bidding competitively for Government contracts would now b&
faced with the necessity of designing around the "packaging looks" of
a product covered by a design copyright which may not rise to the
stature of patentable novelty under the patent laws. Thus, the "non-
utilitarian looks" of a vehicle which may not be protectable as a design
patent would be given copyright-type protection under the bill.
We, therefore, strongly oppose the new type of protection proposed
by title II of the bill.
Section 1498(a) is also amended to provide for the first time for
suits against the United States for unauthorized use of inventions,,
whether patented or unpatented.
Thus, it would appear to permit a suit based on a trade secret con-
taining an unpatented invention. This also, we strongly oppose as
inconsistent with limiting claims against the United States in 28
U.S.C. 1498 to those recognized by the patent and copyright laNvs. No
adequate showing has been made that this type of protection, on
balance, is in the public interest.
The provision in section 220 whereby simultaneous suit can be filed
against the Administrator who carries out the provisions of title II,
section 230, and an alleged infringer of the design in that it subjects
an alleged infringer to suit in the same action even though the thresh-
old question whether a certificate can issue under the provisions of
141
the law lias not been decided as between the Administrator and the
applicant for registration is believed undesirable. While it is not
likely that the issuance of certificates of registration will be frequently-
refused if certain basic requisites of applications are met, neverthe-
less, if a situation should arise of a refusal of issuance of a certif-
icate of registration by an Administrator, this should require a
separate and distinctive action to secure issuance thereof, especially
since governmental functions should not normally be mixed with
the proprietary enforcement functions of courts in adjudicating pri-
vate rights and remedies.
Certain technical corrections appear indicated in title II as follows :
Page 66, lines 22 and 23 appear reversed.
Page 73, line 22, "Section 311" should read "Section 211."
Page 73, line 26, "mortgage" should read "mortgagee."
Mr. Kastenmeiek. Thank you. I had difficulty understanding this.
What you are referring to by using the term fair use is a proposal
that we remove the uncertainty in connection with the present lan-
guage in the bill; your suggestion does not substantively change the
construction of the bill, bu^ is more or less a clarification of it, in an
attempt to remove the uncertainty ?
Mr. GoLDBLOOM. I believe that is right.
Mr. Kastenmeier. With respect to the term, of course, you clearly
opposed the term proposed in the legislation. Why did the Department
of Justice propose to change the term of 50 years to 56 or life ? In other
words, you perceive that there was an inequity on the part of authors
who might seek terms for life or some other terms other than what is
present in the law ?
ISlr. GoLDBLOOM. To the extent that it may be urged that the present
term does not fully protect an author who may live a long life and
lias created a copyrighter's work in his early years. We believe that in
constitutional concept, furnishing this protection to authors for their
creations, that the present law may very well not be sufficient to pro-
tect that interest. We feel, however, that the bill as drafted goes far
beyond the requirement or the need to protect authors or their crea-
tions. For that reason we would lengthen the 56-year term to the ex-
tent that it may last during the duration of the lifetime of the par-
ticular author,
Mr. Kastenmeier. Had you wondered or determined why the rest of
the world had gone to a life plus 50 at some point during the codifica-
tion of their copyright laws ?
Mr. GoLDBLOOM. We laiow they have gone that way. They have, we
believe, different considerations that they pursue in furnishing this
type of protection.
Mr. Kastenmeier. How would theirs be different from our own ? It is
a very important point.
Mr. GoLDBLOOM. Well, we think that our own considerations flow
from constitutional provisions of the concept of thereby protecting
authors and to promote and advance science and useful arts for a
limited time under the concept as expressed in the constitution.
In our view a term which extends for 56 years or the lifetime of the
autlior, whichever is greater, would serve those constitutional goals
of a limited time, which is a very clear constitutional concept. Cer-
tainly, 150 years in our view is an extended period of time considerably
above the authority granted.
142
Mr. Kastenmeier. Do you have any jurisdiction or a single authority
that says the contemplation of the franiers of the Constitution is con-
trary to what the bill proposes ?
Mr, GoLDBLOOM. It is only our reading of the Constitution.
Mr. IvASTEXMEiER. Would you answer the question of whether you
found or looked for an authority ?
Mr. Goi.DKLooM. We have looked, but haven't foimd any.
Mr. Kastenmeier. It's all on the other side ?
]\Ir. G0LDBL003I. I don't know that it's there either.
Mr. Kastenmeier. We have concluded that the State Department
and most nations of the Earth are out of tmie with the contempla-
tion of the Founding Fathers?
Mr, GoEDBLooir. I don't believe that most nations of the world are
enacting legislation on the basis of the Constitution of the United
States,
Mr. Kastenmeier. In describing the effect of the term, I think you
said it has the effect of doubling the present term, the present term
being 50 years. It would make it 112 if you subtract the 50. It means
that you are suggesting that after creation, the average author lives
62 years ; is that correct ?
]\Ir. GoLDBLOO]\r, I don't believe we intended to be precise in mathe-
matics ; it was an appi-oximate figiire that we were trying to get.
Mr. Kastenmeier. To me it doesn't even seem approximate. I don't
mean to nitpick, but I think the effect is somewhat overdescribed in
saying that it doubled the term. Perhaps it might increase it by a
probable figure of 50 percent but it scarcely doubles it.
I think you are entitled to take whate\'er point of view the Depart-
ment desires to in that connection and I would say that the burden is
on those proposing to change, to justify the change. I think that is the
case and to that extent you are probably not to be criticized.
In title II, which covers ornamental design, is it your point of view
that what is doiie is appropriate or is it your point of view that
nothing should be done with respect to that which is proposed to be
covered in title II ?
Mr. Goldbloom. It is our point of view that nothing should be done.
Mr. Kastenmeier. I'm going to yield to the gentleman from New
York, Mr, Pattison. I caught you bv surprise that time, didn't I?
Mr. Pattison. You surely did. I am interested also in his opinion
on the term and I also respect your opinion that it should be some-
thing other than life plus 50, but I do wonder if you are serious about
that, being that we are somehow constitutionally constrained for some
period of time ?
It is limited as opposed to unlimited. Certainly, it could be life plus
50 or 1.000. Constitutionally, couldn't we do anything we want?
Mr. Goldbloom. Sure. My statement is not to say that there is any
limitation but the provision is to promote and advance science and the
useful arts and for the protection of authors.
Mr. Paitison. You can protect them. We generally operate with
notions against having rights fixed in perpetuity. Property rights cer-
tainly are not fixed that way. In other words, after our death we can
enjoy still those rights in essence.
Mr. Goldbloom. There are limitations on that generally in the law
but we have here other considerations. Those considerations are, as
I say, the promotion of science and the useful arts and the protection
143
of authors. If we focus on these, we find in the Constitution a sense of
not having it for a very extensive term.
Mr. Pattisox. But, is there not any kind of definitional problem ;
you don't think it defines anything else than what is proposed in this
bill?
Mr. GOLDBLOOM. No.
[Mr. Pattison. I'm interested in the fair-use provision that you have
remarked on. It seems to me you are proposing as to nonprofit institu-
tions that there be limited use of reproduction. In other words, schools,
libra^ries, and things like that can reproduce without any considera-
tion; If you want 50 copies for your class, then without having to buy
50 copies of the journal, you can go ahead and reproduce it and that is
OK?
Mr. GoLDBLOOM. Yes.
Mr. PArnsoN. And that is related to nonprofit organizations?
Mr. GoLDBLOOM. Yes, educational activities.
Mr. Pattison. AYlien I think in terms of the fact that many things
are written for that market, how do you respond to that; in other
words, if something is designed to be used in an educational institu-
tion which is normally nonprofit, how do you protect that author?
Mr. GoLDBLOOM. This is not designed to make unlimited reproduc-
tions of copyrighted material, but it is designed to expand and
broaden.
Mr. Pattison. Doesn't it make it unlimited when it is used in non-
profit institutions ?
Suppose I am writing a school book and they are the only people
that are going to use it. I am not going to sell my book in the local
drugstore. The book I am writing is for the use of schools which are
almost always theoretically nonprofit. How do I protect that author?
Isn't it true that under your remarks you would eliminate that pro-
tection ?
Mr. GoLDBLOOM. Well, we think it could be protected perhaps by
contractual rights between the publisher and the user. It is not our
purpose to support unlimited copying of textl^ooks.
]\fr. Pattison. But, I think your remarks would do that; I think
your suggestion would actually do that, wouldn't it? You exempt the-
fair-use provisions for educational use by nonprofit institutions.
Therefore, if somebody reproduces a textbook and distributes it to
their class, even 1,000 copies, that would not be prohibited under the
act as changed by your suggestion ?
Mr. GoLDBLOOM. I do not believe that we would want this construed
to allow unlimited reproduction of textbooks where textbooks are
written for purposes of education.
Mr. Pattison. On the area of CATV, I take it your suggestion as
to the CATV system within the normal grade B or normal viewing
area where the signal reaches users, th.at the system would not have
to pay anybody for that. As for importation of signals fi'om outside
that contour you would approve of them paying something?
Mr. GoLDBLOOM. Yes. It is only where there is reproduction of the
signal within the local service area.
Mr. Pattison. They then would not have to pay for that.
Mr. GoLDBLOOM. Yes, the importation into that area or exportation
outside of that area would have to be compensated for.
144
Mr. PATTisoisr. Thank you.
Mr, lO.STENMEiER. The gentleman from New York, Mr. Badillo.
Mr. Badillo. No questions.
Mr. IvASTENMEiER. The gentleman from Massachusetts.
Mr. Drinan. Thank you, Mr. Chairman.
May I ask you, sir, by what process does the Department of Justice
come to these conclusions and, who is the "we" you keep referring to ?
Mr. GoLDBLOOM. In our statement, broadly, we consulted various
segments of the Department's divisions that have interests concerning
this bill.
Mr. Drinan. From what premise did you operate ; why are you m-
f erring something that is all within a legislative judgment? Is it your
premise that the first amendment of the Constitution will provide
that protection, or what ?
Mr. GoLDBLOOM. We have different divisions within the Department
that have an interest in this. The Antitrust Division has broad in-
terests in the administration of the antitrust laws. The Criminal Divi-
sion has an interest in the bill to the extent that there are criminal
provisions.
Mr. Drinax. An interest; what do you mean by that? From what
premise do you operate; why are you here? In other words, do you
want a law that is easy to execute or what is your major premise?
Mr. GoLDBLOOM. The Antitrust Division administers the antitrust
laws and, to the extent they feel that the provisions in the copyright
law have an effect upon their broad interest in the economy of our
country, they have set forth their interests in this.
Mr. JDrixan. Did you testify in the Senate ?
Mr. GoLDBLOOM. I personally did not testify.
Mr. Drinan. On page 24 of your statement, I have been very inter-
ested in the fact that you mentioned here that :
At present, the government has no clear-cut authority to destroy infringing
articles which have been seized or otherwise obtained in the investigation or
prosecution of a tape piracy case or, for that matter, any criminal copyright
infringement case. This lack of specific authority has resulted in critical storage
problems for many FBI and U.S. Marshal's oflSces throughout the country and
poses the embarrassing possibility that the government may be ordered to
return known infringing articles to a convicted defendant.
Do you have the power to seize them ?
Mr. Mtjrphy. We have the power to seize them as evidence for ^do-
lations of the law pursuant to a warrant, either pursuant to a warrant
of arrest or to a search warrant. The problem arises when we seize
substantial quantities of these things that are possessed with the in-
tent to violate the law, and what to do with them. There is no clear-
cut authority, and we stress the clear cut because there is provision
m the copyright law for the destruction of materials that are infringe-
ment oriented.
Frankly, of course, until the enactment of Public Law 92-140, the
privilege of seeking the destruction of those materials alluded only
to the copyright owner. We think by the enactment of Public Law 92-
140 the Federal Government has been vested with the authority for for-
feiture and destruction of such infringing materials. But, in order to
make it absolutely clear that that right exists in the Federal Govern-
ment, we propose this forfeiture provision.
;145
Mr. Drixan. You suggest on page 24 that the FBI and U.S. mar-
shal's office are posed with the embarrassing possibility that the Gov-
ernment may be ordered to return known infringing articles to a con-
victed defendant. Tell me more about that; can anyone sue?
Mr. MuRrHY. Yes, sir, some have sought orders from the court.
Mr. Drinan. Why would that be embarrassing if you are just doing
what the law gives you authority to do ?
Mr. Murphy. We don't say it is embarrassing to do what the law
provides for, but that there are erroneous judgments on the part of
courts that have resulted in the return of materials to the violator.
Mr. Drinan. But you want the authority over all of the equipment
to be able to destroy it and never return it and not give any compensa-
tion for it when some of that could be used
Mr. JNIuRPHY. May I point out that the copyright owner has that
authority right now, to seize the infringing materials.
]VIr. Drinan. That is an entirely different question.
Mr. Murphy. Well, it is similar, it seems to me. These are mate-
rials that are used and possessed with the intent to violate the law.
Mr. Drinan. Once again you are telling me, you are stating that
the Government is continuing to possess these things when the owners
may well come under the law, have the right to take possession of the
infringing articles.
Is there anything here, sir, any policy position you take on the
question of performance royalties ?
As you know, the Senate is deeply divided on this. Is there anything
in your statement as to any position that the Department of Justice
takes on that?
Mr. GOLDBLOOM. No.
Mr. Drinan. You have taken a position on other questions here.
How come you missed this very fundamental one that this committee
has to decide ?
Mr. GoLDBLOOM. We attempted to limit our position to those areas
of interest that the Department of Justice administers or represents,
insofar as it represents other Federal agencies and departments.
Mr. Drinan. I yield back.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson. Could you tell me, sir, what is the nature of the
property rights in copyrighting, in this context. Is my copyright and
my property right subject to execution and sale under a valid judg-
ment of a court ?
Mr. GoLDBLOOM. I believe it is.
Mr. Danielson. Could it be pledged as security and subsequently
my security interest be foreclosed ?
Mr. GoLDBiiOOM. I believe it could be.
Mr. Danielson. In other words, it could be taken from me by law ?
Mr. GoLDBLOOM. Yes ; depending on the State law.
Mr. Danielson. Under section 104(c) the State Department repre-
sentative pointed out that it favored section 104(c) which would tend
to prohibit the enforcement of the valid judgment of a foreign court
as to the copyright of one of its nationals within the United States ;
are you willing to comment on that ?
Mr. GoLDBLOOM. I would prefer, if I might, to supplement the record
on that. We have not had an opportunity before today to see the State
146
Department's position on that and the Department of State may very
well have a position on that.
Mr. Danielson. I only make a request. I don't know some of the
answers, but I am seeking them and any help that you could provide
I would appreciate. I personally have a problem; 1 don't see how we
•can hang on to our comity with other nations if we refuse to recognize
the judgment of their courts whether we agree or not. That poses a
problem for me and I would appreciate any information you can get
for me.
Mr. GoLDBLOOM. I will try.
Mr. Danielson. On the subject of cable television, you stated on
page 16 that you feel that secondary transmission should be com-
pletely royalty free and free of liability so long as it is within the local
service actually, because they are just filling in blind spots and miprov-
ing transmission?
Mr. GoLDBLOOM. Yes.
Mr. Danielson. And then you conclude that such transmission does
not impair the primary transmitter's market and, in talking about
the broadcasting stations, in fact you say it enhances it and I concur.
Then you say the copyright holder is helped and not hurt by such
activity. What is the rationale for that '^
ISIr. GoLDBLooM. To the extent that there might be an agreement
between a copyright holder and the broadcaster concerning the use
■of the material, that the ability to enhance the viewing and the num-
bers of viewers within the local service area, would seem to be some
consideration between the parties. If it is demonstrable, more people
would have access to this.
Mr. Danielson. Are you saying in effect that when a copyright
owner enters into a royalty agreement with a broadcaster, usually a
TV broadcaster, that the amount of royalty which is paid is based
at least in part upon the number of viewers which the station can
demonstrate watch the program at time 7 p.m., for example?
Mr. GoLDBLOOM. It may be something other than royalties for the
copyright; it may just be advertising ability, the possibility of adver-
tising a copyrighted work.
Mr. Danielson. It is something of value to the copyright owner
whether it is money or prestige or whatever, his sense of value is
entirely subjective. I understand that, but the point is that the com-
pensation in my money or money's worth to the copyright owner is
based in part on the numbers of viewers?
]VTr. GoLDBLOOM. That is correct.
Mr. Danielson. That is my understanding. All right, for that rea-
son T will once ajrain state your conclusion in the last sentence of para-
graph 1 on pap-e 17 of your statement, "the copj'^right holder is helped
anrl not hurt bv such activity."
"WHiat thp- copvrio;ht owner <Tets at this consideration is greater or
less depending upon the rated viewing of the program at the time
of the nublication?
l^^r. GoLDBLOo:\r. Tos.
Mr. Danielson. We are talking about a secondary transmission
"vrithin the primarv viewing area. Let us take for an example southern
rnli^ornia which has our laro-est metronolitan area, Los Angeles. That
area is a hasin surrounded by a wall of mountains. It is a lovely area,
147
.'but you cannot get a primary transmission from Los Angeles because
of the mountains. Suppose I have a cable system and I pick up the
Los Angeles broadcast and take it by cable into the valley and the
desert and distribute it. I'm going to call that, for our purposes a
primary transmission to dispose of the secondary transmission you
are talking about. Do you feel there should be an additional fee there ?
Mr. GoLDBLooM. Yes.
Mr. Danielson. Why?
Mr. GoLDBLOOM. Of course, the whole subject of these copyright
laws has been debated long and hard to the extent that the Congress
has attempted through this bill to accommodate those various inter-
ests. We feel that it has accomplished Ijeneficially a great deal because
there are competing interests here. Cable television does have the
ability to extend beyond the m.ountainous area that you described,
something which other systems are not naturally or not normally
able to do.
JNIr. Danielsgn-. Is there anything natural or normal about the
primary transmission: it is a mechanical device, an electronic device,
-a creation of man which has been out in these areas. Seriously, your
rationale to support your statement that the copyright holder is helped
and not hurt by such activity within the primary viewing area, does
it not apply equally to the viewing over the mountains ?
Mr. Goi'dbloom." Well, it does, but in the context of the world of
communications there is a need we feel to accommodate the interests
of both the cable as well as the copyriglit owners.
]Mr. Daxtelson. How would they not be accommodated ? Is it not a
fact that the royalty agreement between the copyright holder and
the broadcasting station is based in part on the number of viewers
and, in calculating the number of them, the broadcasting station
includes those who ai'e reached through the cable transmission on the
other side of the mountain?
Mr. Goldbloom. I don't know that that is necessarily correct.
INIr. Danielson". Do you have anv documentation or authority for
that?
Mr. Goldbloom. I would have to look into that.
Mr. Danielsox. I don't expect you to know answers on a multitude
of problems, but I think you are going to find in the advertising busi-
ness the rates that the broadcaster receives for advertisements— and
that is what keeps him alive — are based on the viewers; the rate he
pays the copyright holder is based on the viewers.
So. if you expand the number of viewers, you are going to expand
the advertising rates and the amount he pays for his royalties. I think
you will find that to be the case. Assuming that is true, then would not
that be your rationale on secondary transmission whether it be over
the mountain or inside the mountain, if you are applying that
rationale ?
Mr. Goldbloom. I think it would.
Mr. Danielsox. On fair use, Mr. Pattison has brought out the
analogy of making textbooks for a school. This poses a real problem
in my mind yet, I am hoping it will be cleared up. I am sure we agree
that if the school were to go through a first-class printing operation
and reprint, set plates, and type, print and bind a copy of a book, you
would have an infringement and there would be royalties.
148
Then back down one step instead of doing the traditional photo-
offset job, but it be otherwise the same, I think you wouhT agree you
still have a copyright violation. So, if you back down to a mimeograph
and suppose you typed on a stencil and then bound it with a nice,
hardboard cover, et cetera, I think you would still contend, and many
of us would, that you would still have a violation.
You take the same mimeograph, but you don't bind it and have just
loose sheets now you are confronted with whether or not it is a
copyright violation and, if you go to Xerox, now you have two
questions ; what do you do with that ?
I have gone through this step by step on purpose. I wonder if we
are coming to grips with the real issue ? Should we basically copyright
on the type of mechanical reproduction used or upon the number of
copies; is it valid to say it is the use to which they are put, whetlier
they go to a nonprofit school ? I don't know if there is a valid way of
determining this and I am seeking help because I don't understand it.
Are we saying when we talk about schools and churches, are we
saying we must be good to the nonprofit organizations? There cer-
tainly isn't this consideration on brooms and buckets and typewriters
and the people who sell printed books to the schools make a profit. I
don't know the answer and I want to find out. Thank you.
Mr. Kastenmeier. The gentleman from Illinois, Mr. Railsback.
Mr. Railsback. On page 16 of your statement, you indicate that
secondary transmission within the local service area of the primary
transmitter finds the cable system only filling gaps or improving
reception in the service area of the primary transmitter and supple-
menting the primar}^ transmission. Of course, the primary transmitter
has sponsors; when the secondary transmitter within this area picks
up the program does he not also run the commercials and wouldn't
that have an adverse effect on possibly discouraging a prospective
sponsor ?
In other words, I don't see how that wouldn't really dilute the
effectiveness of a sponsored program.
Mr. GoLDBLooM. I am not certain specifically how the FCC rules
operate, but I believe they would have to reproduce the program in its
entirety with the sponsored portions.
Mr. DANiELSOisr. I am willing to be corrected, but it is my under-
standing that when a cable system is picked up by a broadcaster that
it is transmitted in its entirety and they do not excise the commercials.
Therefore, the sponsor gets the advertising over the mountain as
well as inside of the mountain.
Mr. Eailsback. I see. First of all in respect to Father Drinan's
question, and comments, I certainly do welcome you; we invited you
to testify. Secondly, with respect to forfeiture, aren't we talking
about record pirates who have actually stolen somebody's work ?
Mr. GoLDBLOOM. Yes.
Mr. Railsback. I just want to conclude by saying that I do not
find that particular recommendation draconian. I disagree with some
others, but I thank you.
Mr. Kastenmeier. The Chair will state that indeed you were invited
along with the Justice Department, along with the Departments of
Commerce, and State. As a matter of fact, your predecessor appeared
149
in this room 10 years ago on a similar bill and you are aware of that
lam sure.
Mr. GoLDBLOoM. Yes.
Mr. Kastenmeier. In that connection, what was being considered
was a similar bill and any of the issues you spoke to this morning
were expressed then. Had the views of the Department of Justice,
the Antitrust Division and any other parts of that, changed or are
they the same as they were 10 years ago with respect to this bill?
Mr. GoLDBLOOM. I believe to the extent that issues were then in
existence, our position is close to what they were then. I don't know
because we have not examined each position we took then in light of
the position we have taken today, but I think there is a similarity
and identity.
Mr. Kastenmeier. Do I understand that you regard as the most
important issues, the issue of ornamental design in title II, term
and the manufacturing clause ; those are among the more important
positions, issues as far as the Department of Justice is concerned?
Mr. GoLDBLOOM. Yes. Mr. Chairman, and CATV.
Mr. Kastenmeier. If the bill is reported in its present form, will it
be the disposition of the Justice Department to oppose it, to recom-
mend that the President veto the bill ?
Mr. GoLDBLOOM. I cannot really speak to that at the moment. I
think there is a different function when one is recommending to the
President, what he should do with legislation from when one appears
before the Congress while it is contemplating.
]Mr. Kastenmeier. It is your stance then that you are making certain
recommendations and stating your positions on whether the bill
should be passed or not passed ; that is your reason for being here ?
Mr. GoLDBLOOM. Yes.
Mr. Kastenmeier. Thank you for your appearance.
[The prepared statement of Mr. Goldbloom follows :]
Statement of Irwin Goldbloom, Deputy Assistant Attorney General, Civil
Division, Department of Justic?e
Mr. Chairman: I am pleased to respond to the Committee's invitation to
present the views of the Department of Justice on H.R. 2223, A Bill for the
General Revision of the Copyright Law, Title 17 of the United States Code,
and for other purposes.
We are in sympathy with the general purpose of Title I of the Bill, to provide
a thorough revision and updating of the Copyright Law, Title 17, United States
Code. However, as set out below, we recommend certain modifications in the
proposed revision. We oppose Title II of the Bill which creates a new type of
intellectual property, a hybrid between a copyright and a design patent.
H.R. 2223 and its companion bill, S. 22, are nearly identical with S. 1361 as
passed by the Senate in the 93d Congress on September 9, 1974. There are,
however, technical and perfecting amendments and changes required by the
enactment of Public Law 93-573, providing for interim copyright extension and
increased penalties for tape piracy. A section-by-section analysis of S. 1361
is part of Senate Report No. 93-983, 93d Cong., at pages 102-228. Further details
as to the history of this copyright revision bill appear in the same Report
at pages 101-103. The summary below is specificially directed to features of the
Bill of particular concern to this Department.
Section 107 relates to the "fair use" doctrine. This is fully discussed in Senate
Report No. 93-983, pages 115-120. The scope of fair use in copying is illustrated
to include reproduction by a teacher or a student of a small part of a work to
illustrate a lesson (S. Report 93-983, p. 115). This example, therefore, does not
include reproduction of the entire work to illustrate a lesson. In determining
150
whether the use made of a work in a particular case is a fair use, a court is to.
consider as factors the purpose and character of the use, the nature of the copy-
righted work, the amount and substantiality of tlie portion used in relation,
to the copyrighted work as a whole, and the effect of the use upon the potential
market for or value of the copyrighted work. As to the reproduction of entire
works for classroom use, the doctrine of fair use would be applied "strictly"
(S. Kept. 93-983, p. 117).
Sections lOS, 110, and 111 cover exemptions from liability for copyright
infringement in the fields of library and archive reproduction (Section 108). the-
exemption of certain performances and displays, such as in classrooms in face-
to-face teaching activities of a nonprofit educational institution (Section 110)
and the retransmission of a primary transmission simultaneously with the
primar.v transmission or nonsimultaneously with the primary transmission if
by a "cable system" outside defined geographic areas ("secondary transmissions"
of Section 111).
Section 302 establishes a new term for the duration of copyright. Generally,
this is for a term consisting of the life of the author and fifty years after his
death. In the case of joint works, the period of fifty years commences upon the
death of the last surviving author. For anonymous works, pseudonymous works,,
and works made for hire, the copyright period is for a term of seventy-five years
from the year of its first i)ublication, or a term of one hundred years from the
year of its creation, whichever expires first. Where one or more authors are-
identified for an anonymous or pseudonymou.s work before the end of the copy-
right term, the longer period of copyright terminating fifty years after the death
of the author then applies.
Secti<m 405 deals with the effect of the omission of the copyright notice. Section-
411 covers infringement actions in certain situations.
Section 506 contains special provisions applying to persons who infringe will-
fully and for purposes of commercal advantage. Witli respect to copyright in a
.sound recording, for the first such offense, a person is fined not more than.
$25,000 or imprisoned for not more than one year, or both. For any subsequent
offense a person is fined not more than $50,000 or imprisoned not more than
two years, or both. Section 507 provides a three-year statute of limitations for
both criminal proceedings pursuant to provisions of the Bill after the cause of
action arose (under the provisions of Sections 116 and 506) and for civil actions
after the claim accrued.
Section 601 affords preferential protection to pulilishers and printers of the
United States and Canada (Report 93-983, pp. 195-200).
Sections 801-809 are concerned with the Register's duties to collect royalties
and make determinations concerning the adjustment of copyright royalty rates
for certain uses where compulsory licenses are provided by the Bill. They also
relate to his duties to determine in certain circumstances the distribution of
these royalties deposited with the Register of Copyrights. Section 803 provides
for selection of membership of the tribunal to make necessary determinations
with respect to royalty matters, to be on the basis of a list of names furnished:
by the American Arbitration Association to the Register of Copyrights. Section
804 provides for procedures to be followed by the tribunal in making its deter-
minations. Subsection (e) of Section 804 directs that the tribunal shall render a
final decision in each proceeding within one year from the certification of the
panel, certified by the Register of Copyrights on the basis of the names furnished
by the American Arbitration Association. This subsection further provides that
the Senate Committee on the Judiciary and the House of Representatives Com-
mittee on the Judiciary, upon a showing of good cause, may waive this require-
ment of the rendering of a final decision within one year from the certification
of the panel in a particular proceeding. The judicial review for tribunal final
determinations, provided in Section 809 (concerning the distribution of royalty
fecy). is limited. A court may vacate, modify or correct such a determination
if it was procured by corruption, fraud or undue means, where a member of
the j>aTiel was partial or corruT)t, and where any member of the panel was guilty
of misconduct by which the rights of any party were prejudiced.
Provisions for th*^ protection of ornamental designs of useful articles appear
in Title II of the Bill. Section 201 provides that authors or proprietors of an
original ornamental design of a useful article may secure a period of protection,
except for certain subject areas set out in Section 202, for a period provided in
Section 205. Section 20'! contains d^^finitions of the terms "useful article". "desigTi
of a useful article", "ornamental", and "original" as needed for purposes of
151
the particular protection provided by this Title. Section 204 provides that protec-
tion commences on the date when the design is first made public, either by beinff-
exhibited, publicly distributed, or offered for sale or sold to the public. Section
205 provides that the term of protection extends for five years, subject to being-
renewed for an additional five years prior to the expiration of the initial term.
Section 206 provides for certain design notices to be applied ro the products pro-
tected, and Section 207 limits recovery for infringement if the design notice
requirements of Section 206 have been omitted. However, actual notice of design-
protection to a particular person can take the place of the design notice require-
ment of Section 206.
Section 209 of Title II provides for loss of protection if registration of the
design is not made within six months after the date on which the design was
first made public, who may make application for renewal registration of a
design protected under the Bill, how and under what conditions and with what
supporting papers a design protected under the Bill can be renewed.
Section 212 of Title II deals with the examination of the design application
and provides for cancellation of registrations on application of a person who
believes he is or will be damaged by a registration under this Title. Grounds
for cancellation are that the design is not subject to protection under the provi-
sions of the Title.
Section 220 of Title II provides remedies for infringement of a design pro-
tected under this Title. It provides for a civil action to have judicial review of
a final refusal of the Administrator to register the design as for infringement
if commenced within a time period specified by the Administrator of the Title,
but not less than sixty days after the decision, and permits simultaneous remedy
for infringement by the same action if the court adjudges the design su))ject
to protection under this Title. This would appear to mean that the infringer
would have to be joined as a party defendant with the Administrator of this
Title. The requirements for such an action are that the design proprietor has
filed and prosecuted to final refusal an application for registration of the design,
a copy of the complaint in the action is delivered to the Administrator within
ten days after commencement of the action, and the defendant has committed
acts which would constitute infringement of the design.
Section 221 of Title II gives courts jurisdiction of actions under this Title
and authority to grant injunctions to prevent infringement, including temporary
restraining orders and preliminary injunctions.
Section 222 of Title II relates to recovery of infringement, setting maximum
amounts of recovery per infringing copy by way of compensation and provides
for the delivery for destruction or other disposition of any infringing articles.
Section 223 of Title II provides for cancellation of a registration of a design
by a court and certification by the court of such order to the Administrator.
Section 227 of Title II provides that copyright protection under Title I, when
utilized in an original ornamental design of a useful article, may still be a design-
work eligible for protection under the provisions of this Title. ,
The issuance of a design patent for an ornamental design for an article of manu-
facture under the patent laws. Title 35 U.S.C, terminates any protection of the
design under this Title.
Section 229 of Title II provides that nothing in this Title annuls or limits
common law or other rights or remedies available to a person with respect to-
a design which has not been made public as provided in this Title or any trade-
mark right or right to be protected against unfair competition.
Section 232 of Title II amends various other stalutes. Of particular importance
to the Department is the revision proposed for Title 28 U.S.C. § 1498(a) to pro-
vide that whenever a registered design or invention is used or manufactured by
or for the United States without license of the owner thereof, the owner's i-emedy
shall be by action against the United States in the Court of Claims for recovery
of reasonable and entire compensation. Use or manufacture of a registered de-
sign or invention by a contractor, subcontractor or any person, firm or corpo-
ration for the government and with the authorization or consent of the govern-
ment is to be construed as use or manufacture for the United States. Use or
manufacture by or for the United States of any article owned, leased, used by-
or in the possession of the ITnited States prior to, in the case of an invention,
July 1, 1918, and for registered designs, prior to July 1, 1978. is not to be the
basis of an award under this Section. Government employees have the right tO'
sue the government under this Section except when in a position to order, in-
fluence or induce use of the registered design or invention by the government.
Further excluded as a basis for claim under this Section are claims by a regis^
152
traut or patentee or assignee thereof when the design or invention was related
to the oflScial functions of the employee, in cases in which such functions in-
cluded research and development, or in making of which government time,
materials or facilities were used.
Section 233 provides that Title II of the Bill shall take effect one year after
enactment of this Act.
Section 234 precludes a retroactive effect for the provisions of the design
protection of the Bill.
Section 106 states generally the basic rights of copyright owners. Following
sections of the same chapter set forth limitations and exceptions to those rights.
The public interest in the promotion of education and scholarly pursuits calls
for a careful consideration of such circumstances as may impede the dissemina-
tion of knowledge. In this regard. Section 107 of the Bill, dealing with "fair use"
of copyrighted information, leaves unclear the extent to which librarians can
reproduce works for use in libraries. It would seem in the public interest to
work an accommodation between the copyright and such reproduction. But, as
a doctrine applied on a case-by-case basis, "fair use" renders it uncertain whether,
without infringement, librarians or library patrons can make copies of library
materials for the patrons' use. Because of the advantages of the economical
and speedy means of reproduction now available in libraries, it would be socially
desirable not to discourage use thereof by uncertainty over the extent of the
"fair use" doctrine. Thus, Ave strongly believe that a definition in tlie Bill of
the doctrine as applied to such reproduction in libraries is definitely needed.
Moreover, defining the meaning of "fair use" in this connection also could serve
to reduce uncompensated infringement. To carry out our suggestion to give maxi-
mum certainty as to "what is a fair use," and give more meaningful scope to
the exemptions from copyright liability of Section 108 discussed below, we
suggest the following changes : Section 107, last line (p. 9, line 9), change "work."
to—
"work ; provided that nothing contained in this Section shall be construed
to limit the use by reproduction in whole or in part in copies or phonorecords
or by other means specified in Section 106 whenever used in nonprofit edu-
cational activities."
Reason : Clarity of scope of fair use for educational activities.
^Section 108(d), lines 5-6 (p. 10, lines 1, 2), delete "of a small part".
Reason : Libraries should be able to reproduce entire work for scholarship.
Section 108(e), lines 4-7 (p. 10, lines 13-16), delete "if the library or archive
has * * * at a fair price,"
Reason : Too diflScult and cumbersome to make purchase investigation ; dis-
courages use.
Section 108, in subsection (a), provides that it shall not Infringe a copyright
for a library or archives to reproduce or distribute no more than one copy or
phonorecord of a work under conditions specified in subsequent parts of the
Section. These conditions require, among other things, that the reproduction
or distribution be made without any purpose of commercial advantage and that
the collections of the library or archives be open to the public or available to
specialized researchers, whether or not affiliated with the library or archives
involved or with the institution of which the library or archives is a part. Under
subsection (b), the rights of reproduction and distribution free from liability
would apply to a copy or phonorecord of an unpublished work duplicated in fac-
simile solely for preservation and security or for deposit for research use in a
library or archives of the type covered by the Section. Under subsection (c),
the exemption from infringement would apply to a duplication in facsimile of a
published work solely for replacement of a copy or phonorecord that is damaged,
deteriorating, lost or stolen, if after reasonable effort it has been determined
that an unused replacement cannot be obtained at a fair price.
The rights of reproduction and distribution under Section 108 extend to the
isolated and unrelated reproduction or distribution of a single copy or phono-
record of either a publislied or unpublished work on separate occasions unless
the lil)rary or archives is aware or has substantial reason to believe that it is
engajring in a related or concerted reproduction or distribution or engages in a
systematic reproduction or distribution of a copy of an item forming part of a
copyriglited collection or periodical issue or of a copy or phonorecord of a small
part of any other copyrighted work.
As we read this provision, it will not prevent libraries and archives from
reproducing works in machine-readable language in connection with the storage
153
and me of computerized information systems. We hope that the House legislative
history of the Bill will clearly support this construction, for the storage and use
of data in such systems is of great importance to repositories and sources of
scholarly research material. To impose copyright liability impeding the stor-
age of such data would be socially undesirable. If our interpretation of Section
108 is wrong, we recommend that the Section be changed to extend the appli-
cable exemption to reproduction in machine-readable language for storage and
use in information systems.
The ease of transfer of computerized data is another area in which H.R. 2223
raises a problem. Universities, research agencies, government, and private indus-
try are developing information networks using computers and other electronic
efpiipment to speed the transfer of information from source to user. H.R. 2223
does not provide a method by means of which information systems users can
ea^iiy obtain the permission of copyright owners for use of their material. The
difficulty and loss of time entailed in many cases in contacting owners may
inhibit users from including material in their systems. Or users may be unable
to employ material in their systems in sufficient time in situations where speed
is essential. It would appear in the puJilic interest for the Bill to contain some
guarantee that information systems which are willing to pay royalties for mate-
rial used can obtain easier access to copyrighted information, at least in high-
prifrity areas such as scientific and technological works.
The proposed legislation also leaves unclear at what point in the use of com-
puterized copyrighted material the liability for royalty payment attaches. Under
H.R. 2223, it would seem that placing copyrighted data into a computer (which
may form part of an information system) might infringe the copyright. Since
the use of computers for storage and retrieval of information to some extent may
replace the sale of books, in most cases the payment of royalties should be
required. However, just where in the process the royalty payment should be
assessed, is open to question. We believe it unwise to levy a "toll" at the "input"
stage in the process. Levying on the "input" into computers could impede the
development of information systems and may render meaningless any exemption
for tlie use of computerized information for educational purposes which may be
read into H.R. 2223.
The subject of the application of copyright to community antenna television
has presented considerable difficulty in previous drafts of proposed revisions of
the Copyright Code. H.R. 2223 attempts a compromise between the extreme
positions of complete liability for infringement of copyright by secondary trans-
mission by CATV on one hand and almost complete freedom from liability on
tlip other hand. While we support the imposition of a degree of liability upon
CATV, we believe that H.R. 2223 should provide an area of free use for such
systems within the local service area.
The first part of subsection (c) of Section 111 provides for compulsory licen-
sing of secondary transmissions of a primary transmission by an FCC licensed
broadcast station upon comj)]iance with the notice of ownership and the pay-
ment provisions of siibsection (d), and (A) the signals of the primary trans-
mission are exclusively aural and the secondary ti*ansmission is permissible
under the rules, regulations or authorizations of the FCC; (B) where the CATV
.c;ystem is, in whole or in part, within the local service area of the primary trans-
mitter; or (C) where carriage of the signals comprising the secondary trans-
mission is permissible under the FCC rules, regulations or authorizations. We
strongly urge, with respect to (B), that the secondary transmittal should be
completely free of liability ; hence, royalty-free or no licensing would be in order.
The secondary transmission in such a situation, where the CATV system is, in
whole or in part, within the local service area of the primary transmitter, finds
the cable system only filling gaps or improving reception in the service area of
the primary transmitter, supplementing the primary transmission. Such trans-
mission does not impair the primary transmitter's market : in fact, it enhanceg
it. The copyright holder is helped and not hurt by such activity.
Section 203 and Section 304Cc) (fi) (D) concern the termination of trans-
fers and licenses. These Sections would permit the author or his heirs to terminate
the original transfer of his rights at any time during a period of five years
beginning at the end of a specified time. However, Section 203(b)(4) and
parallel Section 304(c) (6) (D) (relating to transfers of copyrights subsisting
after .January 1. 1977) provide that an agreement to transfer rights subsequen:
to the termination of a prior transfer will not be valid unless made after the
effective date of that termination or unless made to the original grantee or his
57-786— 7 G—pt. 1 11
154
successor in title. We do not believe that the grantee or his successor should
be in a preferred position to enter into an agreement for transfer prior to termina-
tion of the original transfer. We see no reason why all potential transferees
should not have an equal opportunity to enter into such an agreement. It is
therefore suggested that subparagraph (4) of Section 203 (b) and subparagraph
(D) of Section 304(c) (6) be deleted.
Section 302 substantially lengthens the time of copyright protection when
compared with the duration of copyright in works under the present copyright
law. At the presnt time, protection is granted for 28 years from the date of
publication and may be renewed for a second 28 years, making a total potential
term of 56 years in all cases. United States patents for any new and useful
process, machine, manufacture or composition of matter or improvement thereof,
are granted for a term of 17 years. 35 U.S.C. 154. Patents for new, original, and
ornamental designs of articles of manufacture are granted for a period up to
14 years. 35 U.S.C. 173.
Patents for plants are granted for the same length of term as for new and
useful processes, machines, manufacture or compositions of matter. 35 U.S.C.
161. Under the proposed Bill, an author would receive a copyright for his life
and 50 years after his death. Considering the average life expectancy of people
today, this will double the length of copyright when compared with the present
one for many works. For anonymous works, pseudonymous works, and works
made for hire, the term is somewhat less but still significantly greater than
provided by the present statute.
Senate Report No. 93-983, pages 167-173, discusses various considerations
for the duration of copyriglit in works. A major argument for increa.sing the
term of copyright appears to be that the extension conforms with foreign laws
which provide for longer terms of copyright than the present United States
law. This argument is presented in the Senate study. However, we do not
believe that this should be the criterion for the proper length of copyriglit
protection in the United States.
Under the Constitution. Article 1, Section 8, the purpose of a copyright is
to promote the progress of science and useful arts by securing for limited times
to authors and inventors the exclusive right to their respective writings and dis-
coveries. While it may be urged that a copyright term of 28 years plus an addi-
tional 28 years might be insufficient to protect the interests of an author in his
writings in view of the lengthening of the ordinary life span in modern times,
the proposed Bill, by its extended duration of the copyright term, appears to
carry the protection far beyond the contemplation of the framers of the Con-
stitution. As an alternative, we propose to provide for the lengthening of the
term of the copyright duration to be at least coextensive with the lifetime of
the author. In this way, the author will be insured protection of liis work for
at least as long as he may live. Thus, we propose the substitution of an alter-
native provision to Section 302(a) as follows :
(i\) In General.— Copyright in a work created on or after January 1. 1977,
subsists from its creation and, except as provided by the following subsec-
tions, endures for a term consisting of 56 years or the life of the author,
whichever is greater.
A conforming amendment should also be made in Section 302(b). The provi-
sions of Section 302(c) should be modified to limit the duration of anonymous
works, pseudonymous works, and works made for hire, to a period of 56 years
from the year of their ci-eation or first publication.
Our proposal would carry out the constitutional concept of promoting the
progress of science and useful arts. A ufV^enr roDviiglit term, as may be
extended by the lifetime of the author, is believed more than adequate to pro-
mote this constitutional purpose.
It has also been urged that growth in communications media has lengthened
the commercial life of manv works. This does not .ins<^ify lengthening the term
of a copyright beyond .56 years or the lifetime of the author because a lengthened
commercial life is not necessarily consistent with the basic constitutional
purnose.
The basic question with respect to copyright duration to be answered by the
Congress is whether a doubling of the present copyright term for manv works
is desirable to promote the progress of science and useful arts. Other forms
of federal protection for creative works, such as pa*-ents for useful devices,
plants, and designs, are all for periods of no more than 17 years. Copvrights
in writings are already in a preferred position. We do not" believe that the
155
promotion of the progress of science and useful arts requires a doubling of the
possible 56-jear copyright period. Our alternative proposal would accommodate
such valid concerns as may exist regarding the present law and, at the same
time, carry out constitutional goals.
Section 405 deals with the effect of omission of the copyright notice. Under the
present Act, omission of notice on published copies of a work ordinarily places the
work in the public domain (17 IJ.S.C. §21). However, if such notice is acci-
dentally omitted from a particular copy or copies, copyright is not lost; but in-
nocent infringers who are misled by the accidental omission are not liable for
infringement. Under Section 405 of the Bill, omission of notice from "a relatively
small number" of copies or phonorecords publicly distributed will not invalidate
the copyright whether or not such omission was accidental. Moreover, the omis-
sion of notice will not invalidate the copyright in a work if registration for the
work is made within five years after the publication without notice and a rea-
sonable effort is made to add notice to all copies or phonorecords distributed to
the public in the United States after the omission is discovered. As under the
present law, innocent infringers who are misled by the omission of notice would
not be liable in actual or statutory damages for infringement. But under H.R.
2223, they might have to surrender profits gained through the infringement and
be subject to injunction or payment of a reasonable license fee for continuing
their activity (Section 405(b)). These provisions would delete from 17 U.S.C.
§ 21 the provision that no permanent injunction shall be had unless the proprietor
of the copyright shall reimburse the innocent infringer his reasonable outlay in-
nocently incurred if the court, in its discretion, shall so direct.
A copyright should be protected from invalidation only when the failure to pro-
vide notice was the result of an accident or mistake or in violation of the copy-
right owner's written requirement that, as a condition of authorization of public
distribution, the copies or phonorecords bear the prescribed notice, and distribu-
tion of only a small number of such items has been made to the public. To permit,
as proposed in Section 405, a copyright owner to issue an entire publication of his
worli: without notice and yet enforce the copyright tends to negate the purpose
of notice. Although innocent infringers would incur no liability, they would still
have to establish their innocence even where the omission was deliberate in many
cases. We suggest that the Section specifically be limited to the effect of omission
of the copyright notice by accident or mistake. We also believe it advisable that
the words "particular copy or copies", contained in the present statute, be used
instead of the broader and more general words "a relatively small number,"
found in Section 405, to designate the limits within which notice may be omitted
without loss of copyright. And we think the discretion in the court to order reim-
bursement to the innocent infringer should be retained.
Subject to specified exceptions, Section 601 provides that the importation into
or public distribution in the United States of more than 2,000 copies of a work
consisting preponderantly of nondramatic literary material in English by an
American or resident alien author and protected under the Copyright Code is pro-
hibited, unless the portions consisting of such material have been manufactured
in the United States or Canada. This Section would reenact in modified form a
previous, highly protectionist nontariff trade barrier (17 U.S.C. 16, 107). We do
not believe that there is either a necessity or desirability for such a provision
which creates an absolute bar to certain books published abroad.
Section 601 is entirely unrelated to questions of copyright. It does not protect
authors at all. On the contrary, Section 601 decreases the value of copyrights by
preventing an American author from granting worldwide publication rights to
an English publisher who offers more favorable compensation than an American
publisher. Whatever the merits of the original "infant industry" justification for
the manufacturing clause, the restriction is clearly unnecessary and inappro-
priate today in light of the strength and success of our industry "and in light of
our nation's commitment to eliminate nontariff barriers to international trade
and ensure vigorous competition.
For these reasons. Section 601 should be stricken from the Bill, and the "manu-
faotiiring clause" should be eliminated from our copyright law.
With respect to the Department's anti-piracy program in the sound recording
field, we note the following as areas where amendments are desirable :
Section 506 should be amended to provide for forfeiture of infringing articles
in criminal cases resulting in convictions, and a new section should be added to
provide for summary and judicial forfeitures in criminal cases.
156
At present, the government has no clear-cut authority to destroy infringing ar-
ticles which have been seized or otherwise obtained in the investigation or pros-
ecution of a tape piracy case or, for that matter, any criminal copyright infringe-
ment case. This laclv of specific authority has resulted in critical storage problems
for many F.B.I, and U.S. Marshals' offices throughout the country and poses the
embarrassing possibility that the government may be ordered to return known
infringing articles to a convicted defendant.
With proper amendments, H.R. 2223 could eliminate this most serious problem.
We strongly urge the following revisions :
1. There should be added to Section 506 a new subsection which should be
designated as :
(b) When any person is convicted of any violation of subsection (a), the
court in its judgment of conviction shall, in addition to the penalty therein
prescribed, order the forfeiture and destruction or other disposition of all in-
fringing copies or phonorecords and all implements, devices, equipment or
other articles of whatever kind used or intended to be used in the manufac-
ture, use, or sale of such infringing copies or phonorecords.
Present subsections (b), (c), and (d) need to be redesignated as subsections (c),
(d), and (e), respectively.
A conforming amendment should be made to Title 18, United States Code, Sec-
tion 2318, so that it reads as follows :
Section 2318 :
{a) ( present Section 2318 ) .
(b) When any person is convicted of any violation of subsection (a),
the court in its judgment of conviction shall, in addition to the penalty
therein prescribed, order the forfeitui-e and destruction or other disposition
of all counterfeit labels and all articles to wliich counterfeit labels have been
affixed or wliicii were intended to have had such labels affixed.
(c) Except to the extent they are inconsistent with the provisions of
tliis title, all provisions of section [new forfeiture section described below]
Title 17, United States Code, are applicable to violations of subsection (a).
2. A new section should be added reading as follows :
(a) All copies or phonorecords manufactured, reproduced, distributed,
sold, or otherwise used, intended for use, or possessed with intent to use in
violation of section 506(a), and all plates, molds, matrices, masters, tapes,
film negatives, or other articles by means of which such copies or phono-
records may be reproduced, and all electronic, mechanical, or other devices
for manufacturing, reproducing, assembling, using, transporting, distribut-
ing, or selling such copies or phonorecords may be seized and forfeited to the
United States.
(b) All provisions of law relating to (1) the seizure, summary and judi-
cial forfeiture, and condemnation of vessels, vehicles, merchandise, and bag-
gage for violations of the customs laws contained in Title 19, United States
Code, (2) the disposition of such vessels, vehicles, merchandise, and bag-
gage or the proceeds from the sale thereof, (3) the remission or mitigation
of such forfeiture, (4) the compromise of claims, and (5) the award of
compensation to informers in respect of such forfeitures, shall apply to
seizures and forfeitures incurred, or alleged to have been incurred, under
the provisions of this section, insofar as applicable and not inconsistent with
the provisions of this section ; except that such duties as are imposed upon
the collector of customs or any other person with respect to the seizure and
forfeiture of vessels, vehicles, merchandise, and baggage under the provi-
sions of the customs laws contained in Title 19 of the United States Code
shall he performed with respect to seizure and forfeiture of all articles
described in subsection (a) by such officers, agents, or other persons as may
he authorized or designated for that purpose by the Attorney General.
Proposed Section 114 should be amended to provide for the copyright owner
of a sound recording to have the right to make derivative works or it should be
amended to clarify that persons other than the copyright owner do not have such
a right absent consent of the copyright owner, notwithstanding the fact that
the sound recording copyright owner would have no such right.
Section 114 limits the specific rights of a sound recording copyright owner to
those granted to copyright owners by parts (1) and (3) of Section 106. That is,
sound recording copyright owners have the right :
(1) to reproduce the copyrighted work in copies or phonorecords; and
*******
157
(3) to distribute copies, etc.
The right to prepare derivative works based on the copyrighted work (part 2
of Section 106) is withheld from a sound recording copyright owner despite Sec-
tion 103 which states that such works are copyrightable and despite the fact
that sound recording copyright owners are entitled to make and copyright
derivative works under present law, 17 U.S.C. § 7. There is a real possibility that
an unauthorized duplicator who made a "derivative" work by slightly altering
the original copyrighted sound recording would claim that he did so legally since
the copyright owner is given no exclusive right to make derivative works.
This "potential legal problem could be eliminated by including part (2) of Sec-
tion 106 in the list in Section 114 of exclusive rights granted to a sound recording
copyright owner — an action which would grant to sound recording copyright
owners no more rights than they presently possess. Section 506 should be
amended accordingly to include part (2) of Section 106.
A third area for concern is proposed Section 301 (pages 32-33), subparagraph
(b), which states :
Nothing in this title annuls or limits any rights or remedies under the
common law or statutes of any state with respect to :
*******
(3) activities violating rights that are not equivalent to any of the
exclusive i-ights within the general scope of copyright . . . including breaches
of contract, breaches of trust, invasion of privacy, defamation, and decep-
tive trade practices. . . .
We believe this language could be read as abrogating the anti-piracy laws
now existing in 29 states relating to pre-February 15, 1972, sound recordings on
the grounds that these statutes proscribe activities violating rights "equivalent
to . . . the exclusive rights within the general scope of copyright. , . ." Certainly
such a result cannot have been intended for it would likely effect the immediate
resurgence of piracy of pre-February 15, 1972 sound recordings. (Note: in any
event, there would be no effect on sound recordings produced after February 15,
1972. since it would appear that the .states cannot constitutionally enforce their
anti-piracy laws against the unauthorized duplication of these later recordings.)
We therefore urge that Section 301(b) be amended to include a new subsection
(4) as follows:
(4) Sound recordings fixed prior to February 15, 1972.
Proposed Section .506(a) should be amended to correct the disparity of sanc-
tions between second-time infringers of sound recording and motion picture copy-
rights and .second-time infringers of other copyrights. As written. Section 506(a)
I>rovides for a maximum $10,000 fine and three years imprisonment for second-
time infringers of all copyrights but sound recording and motion picture copy-
rights. Infringers of these latter two categories are subject, upon conviction of a
second offense, to a maximum fine of $50,000 and two years impi-isonment. We
suggest that these latter infringements are sufficiently serious to warrant at
least the same maximum imprisonment for second offenders as is applicable to
second-time infringers of other copyright's, as well as the larger fine. The term
of imprisonment prescribed should therefore he at least three years.
We support the substitution of "for purposes of commercial advantage or
private financial gain" for the present requirement in 17 U.S.C. § 104 that, to be
criminal, infringements must be done "for profit". The provision in present Sec-
tion 104 for aiders and abettors has been removed, but these individuals will
be liable to prosecution under 18 U.S.C. § 2.
From the standpoint of making deterrents meaningful beyond the financial de-
terrent and provide a penalty for those who can "take" financial losses as a cost
of business, it is recommended that a maximum one-year term of imprisonment l>e
included in the sanctions under proposed Sections 116(d) and 506 (b), (c), and
(d). all of which are provisions the Department suoports.
We also note that Section 115. subparagraph (a) (1). states explicitly and with
clarity what four courts of appeals ^ have ruled is the scope of compulsory licens-
ing under present law. namelv. that absent authorization by the owner of a
composition copyright, the duplication of a sound recording embodying a copy-
T^.TotuJora Mufn'c PuMixhivQ Co. T. Melodi/ Recorrlin (;■<>, Inc., 506 F. 2d .39.^ (T.A. ?,.
r»o(>ember 27. 1974) ; Fame PuMishina Co., Tnc. v, Alahnmn Cnstom Tape. Inc.. 507 F. 2(1
667 (C.A. 5. .Tanuarv 31. 1975) : Duchei<.<? Music Corp. v. Stern 4.5S F. 2d 1305 fC.A. 9>,
certiorari denied, sub nom. Rosner v. Duchess Mii-fic Corp., 409 U.S. S47 ; and Edward B.
Mnrlcs Ulnsic Corp. v. Colorado Magnetics, Inc.. 497 F. 2d 2S9 (C.A. 10). certiorari denied,
stth nom. Colorado Magnetics, Inc. v. Edward Marks Music Corp., 419 F.S. 1120.
158
righted musical composition is an infringement of tlie composition copyright oven
though the duplicator tenders royalty payments and otherwise attempts to com-
ply with present compulsory licensing provisions. This is contained in the linal
sentence of suhpargraph ( a ) ( 1 ) , which reads :
A person may not obtain a compulsory license for use of the [nondramatie
musical] work in the duplication of a sound recording made by another.
Since this prohibition is not limited to copyrighted sound recordings, the effect is
to prevent the operation of the cominilsory license mechanism for making copies
of any sound recordings embodying copyrighted musical compositions. The De-
partment wholeheartedly supports this pro\ision.
Section 804 deals with procedures before the tribunal which determines
adjustment of copyright royalties and their distribution under specified sections
of the Bill. We object to the provision in subsection (e) of this ^Section that
the Senate Committee on the Judiciary and the House of Representatives
^Committee on the Judiciary may waive a requirement that a final decision in
■each proceeding be rendered by the tribunal witiiin one year from tlie certification
of the panel by the Register of Copyrights. The constitutional division of duties
among the three principal branches of the government places in the Congress the
legislative responsibilities. However, once a law lias been enacted, it is for the
Executive Branch to carry out the intents and purposes of the law as directed
by the Congress. In our view, legislation, once enacted, should not be modified
or waived by actions of a committee of the Congress. It is suggested that if
waiver of the one-year requii-ement is desirable under particular circumstances,
tliese circumstances be generally outlined in tlie Bill and that the tribunal be
given authority upon good cause shown to extend the period of time for
rendering decisions.
Of particular concern to this Department is the new form of copyright protec-
tion provided by Title II of the Bill. This new form of protection is a hybrid
between design patents (35 U.S.C. § 171-173) issued for a period of up to 14
years by the Patent OfHce for new, original and ornamental designs of articles
of manufacture and the copyriglit laws which provide for registration and issu-
ance of certificates of copyrights for the writings of authors. The new protection
that is provided under the Bill is not presently available under the copyright
laws and can only be obtained through a design patent after an examinati(jn
procedure which dtr^termiues whether the ornamental design meets the criteria
of patentability, including unobviousness in view of the prior art, as provided
by 35 U.S.C. 102, 103. While the protection period as proposed for the new type
of ornamental design protection is only a maximum of ten years as compared
with the maximum of 14 years available for a design patent, it is granted without
the need of meeting the novelty and unobviousness requirements of the patent
statute.
A threshold consideration before finding that the needs are such that this new
type of protection should be available is whether the benefits to the public of
such protection outweigh the burdens. We believe that insufficient need has
been shown to date to justify removing from the public domain and possible
use by others of the rights and benefits proposed under the present Bill for such
ornamental designs. We believe that design patents, as are granted today, are
as far as the public should go to grant exclusive rights for ornamental designs
of useful articles in the absence of an adequate showing that the new protection
will provide substantial benefits to the general public whicJi outweigh removing
such designs from free public use. While it has been said that the examination
procedure in the Patent Office results in serious delays in the issuance of a design
patent so as to be a significant problem and damaging to "inventors" of orna-
mental designs of useful articles, the desirable free use of designs which do not
rise to patentable invention of ornamental designs of useful artir-Ies are believed
to be paramount. If the contribution made to the public by the creation of an
ornamental design of a useful article is insufficient to rise to patentable novelty,
the design should not be protected by law. The Department of Justice has con-
sistently opposed legislation of this character.
To omit federal statutory protection for the form of a useful object is not to
deny the originator of that form any remedy whatsoever. If he can prove that
competitors are passing off their goods as the originator's by copying the prod-
uct's design, he may bring an unfair competition action against such copyists.
Crescent Tool Co. v. Eilborn d Bishop Co., 247 Fed. 299 (C.A. 2 1917). See, also,
Sears, RoeMck & Co. v. Stiffel Co., 376 U.S. 225 (1964), and Compco Corp. v.
Day-Brite Ughting, Inc., 376 U.S. 234 (1964).
159
Quite apart from our opposition to the merits of Title II, we also oppose
enactment of the design protection provisions of this Bill which would provide
a new class of actions against the United States since the Bill proposes to amend
Section 1498(a) to add the new type of design copyrights to the remedies avail-
able to inventors against the United States who have been issued United States
patents when they are used by the United States without authorization of tlie
owner. For example, by amending Section 1498 ( a ) in this way, the Congress will
he creating a completely new problem area fraught with difficulties for govern-
ment procurement. Government contractors who "reverse engineer" alleged
trade secrets in bidding competitively for government contracts would now be
faced with the necessity of designing around the "packaging looks" of a product
covered by a design copyright which may not rise to the stature of patentable
novelty under the patent iaws. Thus, the "non-utilitarian looks" of a vehicle
which'may not be protecta5)le as a design patent would be given copyright-type
protection under the Bill. We, therefore, strongly oppose the new type of protec-
tion proposed by Title II of the Bill.
Section 1498(a) is also amended to provide for the first time for suits against
the United States for unauthorized use of inventions, whether patented or
unpatented. Thus, it would appear to permit a suit based on a trade secret con-
taining an unpatented invention. This, also, we strongly oppose as inconsistent
with limiting claims against the United States in 28 U.S.C. 1498 to those recog-
nized by the patent and copyright laws. No adequate showing has been made
that this type of protection, on balance, is in the public interest.
The provision in Section 220 whereby simultaneous suit can be filed against
the Administrator who carries out the provisions of Title II (§230) and an
alleged infringer of the design in that it subjects an alleged infringer to suit in
the same action even though the threshold question whether a certificate can
issue under the provisions of the law has not been decided as between the Admin-
istrator and the applicant for registration is believed undesirable. While it is
not likely that the issuance of certificates of registration will be frequently
refused if certain basic requisites of applications are met, nevertheless, if a
situation should arise of a refusal of issuance of a certificate of registration by
an Administrator; this should require a separate and distinctive action to
secure issuance thereof, especially since governmental functions should not
normally be mixed with the proprietary enforcement functions of courts in
adjudicating private rights and remedies.
Certain technical corrections appear indicated in Title II as follows :
P. 66. lines 22 and 23 appear reversed.
P. 73, line 22, "Section 311" should read— "Section 211".
P. 73, line 26, "mortgage" should read — "mortgagee".
Mr. Kastenmeier. We would next like to call Mr. Rene D. Tegtmeyer,
an Assistant Commissioner for Patents, representing the U.S. Depart-
ment of Commerce. Would you please identify your colleagues.
Mr. Tegtmeyer. Thank you, Mr. Chairman. With me today are
David Allen and Rosemary Bowie, both of whom are from the Com-
merce Department and in particular from Patents.
Mr. Kastenmeier. I notice you have a prepared statement. You may
proceed.
[The prepared statement of Mr. Tegtmeyer follows :]
Statement of Rene D. Tegtmeyer, Assistant Commissioner for Patents,
U.S. Department of Commerce
Mr. Chairman : I appreciate this opportunity to appear before your subcom-
mittee to express the views of the Department of Commerce and its support
for H.R. 2223 with certain modifications which I shall explain.
H.R. 2223 is the result of 20 years of extensive eftort by the Copyright Office
of the Library of Congress and the Congress to revise the copyright law. I
understand that the testimony of the Register of Copyrights included a discus-
sion of the background concerning this effort and an outline of the principal
provisions of the bill. I will not attempt to be repetitive in this respect.
160
H.R. 2223 is divided into two titles ; Title I. General Revision of the Copyriglit
Law and Title II. Protection of Original Ornamental Designs. As the Depart-
ment views each title from a slightly different perspective, I would like to com-
ment on them separately this morning.
The Department of Commerce would like to highlight three specific areas in
our comments on Title I :
1. The lack of protection in U.S. government works,
2. Preemption of state law with respect to unfair competition, and
3. The inclusion of Canada in the manufacturing requirement.
PBOTECTION OF GOVERNMENT WORKS
Fii'st, proposed section 105, in prohibiting copyright protection for govern-
ment works, creates a special problem for the Department of Commerce. Under
Title 15, United States Code, Chapter 23. the Secretary is required to establish
and maintain a clearinghouse for the collection and dissemination of scientific,
technical and engineering information. This is done through the Department's
National Technical Information Service, called NTIS.
As a matter of policy. Chapter 23 requires that each of the services and func-
tions provided be self-sustaining and self-liquidating, as much as possible, con-
sistent witli its objectives. The Chapter specifically states its policy that the
general public shall not bear the cost of pulillcations and other services which
are for the special use and benefit of private groups and individuals.
With the increased use of reprography, the difficulty of meeting the require-
ment to disseminate technical information on a ba.sis that pays its own way has
increased. It is cheaper for a purchaser to buy one copy of an expensive techno-
logical publication and photocopy it rather than to buy the number of copies
that are actually needed. The lack of copyright protection for most periodicals
made available by NTIS makes this practice legal. However, if NTIS cannot
recoup the cost of preparing and handling its publications, the dissemination,
of this material cannot be maintained on a self-sustaining and .self-liquidating
basis.
An example of the potential harm which could arise from this lack of copy-
right can be seen in the publication. "Directory of Computerized Data Files and
Related Software Available from Federal Agencies— 1974". This doctiment v.-as
prepared in response to the large number of requests received for this informa-
tion. It was prepared at NTIS expense. The approximately $150,000 cost of sur-
veyiiig Federal agencies to gather the information and publishing the directory
was not reimbursed from appropriations. In order to recoup NTIS expenses, a
price of .$60 per copy was set for this 150-page directory. Anyone choosing to
make and sell competing photocopies could do so for a fraction of this price.
Thus, it was necessary for NTIS to risk substantial moneys to produce such
a pi-oduct in the absence of copyriglit protection.
Unauthorized photocopying is especially serious in connection with foreign
sales ; out of the eight largest customers of NTIS, seven are foreign entities
which engage in such cop.ving practices. It has also caused NTIS to be limited
in pricing its periodicals due to the much lower costs of duplication done by
resale marketers and potential customers of government works which are not
copyrighted.
For these reasons, we believe that copyright protection should be provided
works distributed imder Chapter 23, Title 15 of tlie United States Code, similar
to that provided under § 290(e), Chapter 7(a), Title 15, for standard reference
data prepared by the Department of Commerce under the provisions of thnt
Chapter, or in the alternative that the Congress reconsider the statutory
requirement that the services and functions provided under Chapter 23 be
self-sustaining and self-liquidating.
PKEEMPTION
Second, we agree with the preemption of State copyright laws pursuant to
section ,301 (a), and with the principle embodied in tliat section that there should
be a single, federal system for copyright. However, the language of subsection
(b) (8) of section 301 should, in our view, be modified to make it clear that the
phrase "all rights in the iwinre of copyriglit" (italics added) will not be
construed to preempt parts of the Stnte law of unfair competition which
are now codified in statute or established by Federal and State Court decisions
applying the common law.
161
Section 301(b) (3) is intended to exempt State unfair competition law from
the preemptive effect of section 301(a). Among tlie rights and remedies not
l)reempted are those arising from the violation of rights "not equivalent to any
exclusive rights within the general scope of copyright". These "not equivalent"
rights are said to include "breaches of contract, breaches of trust, invasion of
privacy, defamation, and deceptive trade practices such as passing off and false
representation." The problem we have is that the listing is incomplete and the
language is more limited than that which would describe the present scope
of established State unfair competition law.
As a solution, we propose a more comprehensive and inclusive listing of unfair
competition torts in subsection (b) (3). The proposed amendment :
"(3) Activities violating rights that are not equivalent to any of the exclusive
rights within the general scope of copyright as specified by section 106, including
breaches of contract, breaches of trust, invasion of privacy, defamation, and
Cdeceptive trade practices such as passing off and false representation] acts,
trade practices, or courses of conduct which cause or are likely to cause confusion,
mistake or deception, or which are likely to result in passing off, false or tnislead-
ing representations, disparagement, ivrongful disclosure or misappropriation of
<?. trade secret or confidential information, or activities ivhich othertvise con-
stitute unfair competition hy misrepresentation or misappropriation.'" (Deletions
bracketed ; additions italicized )
In our opinion, this proposed amendment would more accurately state the
range of unfair competition torts which are now regulated by the states, so that
the examples listed will not be limiting.
It should be noted that the phrase "unfair competition by . . . misappropria-
tion" is included in our amendment. Obviously, the "misappropriation" of all
of the words of a literary work would be in the nature of copyright and State
laws in this area should be preempted. However, we do not believe that the
entire body of State unfair competition law based upon the landmark Supreme
Court decision in International News Service v. Associated Press (248 US 215
(1918)) should be preempted. While some State decisions relying on the INS
vane may be held inapplicable under section 301(a), we believe that such a remedy
should continue to be available for the type of conduct proscribed in the INS
case.
MANUFACTtTRING CLAUSE
Third, proposed section 601, kno^'u as the "manufacturing clause", essentially
requires that English language, nondramatic literary works by Ametricau
domiciled authors must be printed in the United States or Canada. The present
copyright statute does not include such a reference to Canada. The rationale for
including Canada appears to be that wage standards in the U.S. and Canada are
comparable.
We are opposed to the inclusion of Canada in this provision. Such an inchision
would be a unilateral concession which we believe should be withheld for possible
use by the United States as negotiating leverage in seeing compensating benefits
during multilateral trade negotiations. We note that both houses of Congress
indicated forcibly that United States negotiators should obtain reciprocity for
United States concessions when they enacted the Trade Act of 1974.
Additionally, including Canada in this provision would raise problems in our
relations with other nations, in view of the "most favored nation" obligations in
the General Agreement on Tariff and Trade (GATT) and other treaties. Thus,
enactment of the bill containing this provision might bring about the possibility
of retaliation against the United States from countries other than Canada and
might otherwise hamper our efforts to eliminate non-tariff trade barriers in the
interest of our overall international trade objectives.
TITLE II
Title IT of H.R. 2223 would provide a new system for the protection of origi-
nal ornamental designs of useful articles.
Designs eligible for protection under this title would have to be original. They
cannot be staple or commonplace, or elements commonly used in the relevant
trade, or dictated solely by utilitarian functions, or three dimensional features
of wearing apparel. However, there would be no requirements that the design be
new, and therefore no search of prior designs would be necessary in order to
grant protection.
162
Title II would provide pi-otection only against copying by others and would
not give an exclusive right in the design itself. The term of protection would be
for five years, renewable for one additional five-year term.
Infringement would include making, importing, selling or distributing for sale
an article having a design copied from a protected design. Importantly however,
an Innocent seller or distributor would be an infringer only if he failed to reveal
his source and then reordered the article after having received a personal written
notice of the design protection. This is a greatly reduced level of liability when
compared with that contained in Title I where a seller or distributor is liable as
an infringer for the sale of a single unauthorized copyrighted work.
Design patent protection would continue to be available but a design patent
and design protection under this title could not be maintained concurrently. Also,
copyright protection for designs would be continued, except that if copyright pro-
tection and a design registration were obtained, the copyright protection would
not extend to utilization of the design in the useful article protected by the
design registration.
Today, original ornamental designs for useful articles may be eligible for fed-
eral protection under the patent laws or in some instances, under the copyrigiit
law. In recent years, however, it has been generally agreed that the design
patent laws do not provide adequate protection against design piracy. Because of
the relatively short-lived popularity of many designs, a patent in some cases
cannot be secured quickly enough to provide any useful protection.
The expense in obtaining a design patent today results primarily from the
fact that the Patent and Trademark Office must examine an application to deter-
mine whether it is "new, original, and ornamental". At the present time it takes
almost two years to obtain a design patent. Until the patent is granted, the
designer or manufacturer markets the designs at his own peril, subject to it
being freely copied. The alternative of withholding the design from the market
until the patent issues is impractical in many industries where styles change
rapidly and may even be seasonal.
Since the Supreme Court decision in Mazer v. Stein in 1954, the Copyright OflSce
has accepted an increasing variety of registrations for designs embodied in useful
articles so long as they meet the criteria of being artistic. However, there are
still many types of designs for which copyright protection is unavailable, for
instance, furniture and appliances. Moreover, the term of protection in the
proposed copyright law, life of the author plus fifty years, is much too long for
industrial designs which have a relatively short commercial life.
To exemplify the problems that exist under current practice we note complaints
from domestic manufacturers that their designs have been copied in certain
foreign ureas, particularly in the far east. The imitations are then imported
into and sold in the United States where they often enjoy a considerable price
advantage over the article produced in the United States. We believe that Title
II fills the need for more effective protection for design originators from this type
of unfair competition because it provides quick, inexpensive and short term
protection for original designs.
The Department of Commerce favors this legislation. However, we would like
to highlight some of our specific recommendations which will bring title II of
the bill more in line with other intellectual property protection both nationally
and internationally and will generally improve the protection offered.
Section 204(a) provides that protection for a design shall begin on the date
when the design is first made public. In subsequent sections it is made clear
that the design must be made public before an application for protection can
be filed. This provision will put U.S. residents at a disadvantage if they desire
to obtain protection of their design in foreign countries, many of which, for
example Japan, refuse protection for a design which has been made public
prior to the filing of an application for registration.
In order to prevent the possible loss of protection in foreign countries, it should
not be required that the design be made public prior to registration. Instead, pro-
tection should commence on the date that the registration is published in the
United States as provided for in section 212(a) of the bill. Protection which
begins when the registration is published would provide notice to the public
and would not penalize the person desiring to protect his design outside of the
United States. This would also make Title II consistent with Title I which has
eliminated the prior publication requirement for copyright protection.
Specific statutory language to effect this change will be submitted to the
Congress at a later date.
163
Section 209 appears to limit an application to a single desijjn. This limitation
appears to be unnecessary. An application containing ten or twenty designs
would be no more difficult to process than an application containing one design
because no search of prior desig-ns is necessary. A multiple design application
would save the applicant paperwork, thus, save him time and uiouty. It would
also save the Administrator processing time over an equal number of single
applications. This might result in a lower fee per design. As long as a separate
fee is paid for each design contained in the application there would be no loss
of revenue and both the applicant and the Administrator would beneHt. We have
therefore recommended that multiple design applications be permitted under
this title.
Title II requires that the application be accompanied by a statement setting
forth facts about the design, and that such statement must be under oath. Similar
requirements in Title 35. United States Code, covering patent and trademark
practices permit such required statements to be submitted with a written declara-
tion in accordance with IS U.S.C. 1001 making a false statement punishable by a
fine or imprisonment and jeopardizing the validity of the document. We believe
that such a provision should be applicable to the application for design registra-
tion. Therefore, such declaration should be permitted in lieu of an oath.
Tlie present fee provisions of section 215 of this title are unacceptable to the
Department of Commerce. In our opinion, the design registration system should
be completely self-supporting because the benefits of the design registration
system only accrue to the individual recipient of the registration. Thus, the
public should not be expected to bear any portion of the expense of a design
registration system.
In a study done in 1964, the $15 fee for the design registration under a bill
similar to the present one, was found to be inadequate to provide 100% cost
recovery. The $15 application fee would be even more inadequate today.
Rather than propose different fee levels for each of the functions specified in
section 215 ( a ) , the Department of Commerce proposes that section 215 be amended
in its entirety to give the Administrator the discretion to establish charges suffi-
cient to recover 100% of the cost of operation of the design registration system.
A similar approach is currently being considered by Congress in various bills ta
revise the patent laws.
TESTIMONY OF RENE D. TEGTMEYER, ASSISTANT COMMISSIONER
FOR PATENTS, DEPARTMENT OF COMMERCE
Mr. Tegtmeyer. ISIr. Chairman, I appreciate this opportunity to
appear before your subcommittee to express the views of the Depart-
ment of Commerce and its support for H.R. 2223 with certain modifica-
tions w^hich I shall explain.
TI.R. 2223 is the result of 20 years of extensive effort b}' the Copyright
Office of the Library of Congress and the Congress itself to revise
the copyright law. I understand that the testimony of the Register
of Copyrights included a discussion of the background concerning
this effort and an outline of the principal provisions of the bill. I will
attempt not to be repetitive in this respect.
H.R. 2223 is divided into two titles : Title I, General Revision of the
Copyright Law; and Title II, Protection of Original Ornamental
Designs. As the Department views each title from a slightly different
perspective, I would like to comment on them sepaiately.
The Department of Commerce would like to highlight three specific
areas in our comments on title I :
1. The lack of protection in U.S. Government works and the effect
on one function of the Department of Commei'ce,
2. Preemption of State law with respect to unfair competition, and
3. The inclusion of an exemption for Canada in the manufacturing
requirements.
164
First, proposed section 105, in prohibiting: copyright protection for
Government works, creates a special problem for the Department
of Conmierce. Under title 15, United States Code, chapter 23, the
Secretary is required to establish and maintain a clearinghouse for the
collection and dissemination of scientific, technical, and engineering
information. This is done through the Department's National Tech-
nical Information Service, called NTIS.
As a matter of policy, chapter 23 in section 1153 requires that each
of the services and functions provided be self-sustaining and self-
liquidating, as much as possible, consistent with its objectives. The
chapter specifically states its policy that the general public shall not
bear the cost of publications and other services which are for the special
use and benefit of private groups and individuals.
With the increased use of reprogi'aphy, the difficulty of meeting the
requirement to disseminate technical information on a basis that pays
its own way has also increased. It is cheaper for a purchaser to buy
one copy of an expensive technological publication and photocopy
it rather than to buy the number of copies that are actuallj^ needed.
The lack of copyright protection for most periodicals made available
by NTIS makes this practice legal. If NTIS cannot recoup the cost
of lu-eparing and handling its publications, the dissemination of this
material cannot be maintained on a self-sustaining and self-liquidating
basis.
An example of the potential harm which could arise from this lack
of copyright can be seen in the publication, "Directory of Computer-
ized Data Files and Related Software Available from Federal Agen-
cies—1974."
This document was prepared in response to the large number of
requests received for this information. It was prepared at NTIS
expense. The approximately $150,000 cost of surveying Federal agen-
cies to gather the information and publishing the directory was not
reimbursed from appropriations. In order to recoup NTIS expenses, a
price of $80 per copy was set for this 150-page directory. Anyone
choosinrr to make aiid sell competing photocopies could do so for a frac-
tion of this price. Thus, it was necessary for NTIS to risk substantial
moneys to produce such a product in the absence of copyright
protection.
I^nauthorized photoco):>3^ino: is especially serious in connection with
foreign sales; out of the eight largest customers of NTIS, seven are
foreign entities which engage in such copving practices. It has also
caused NTIS to be limited in pricing periodicals due to the much lower
cost of duplication done by resale marketers and potential customers of
Go^-emment works which are not copyriglited.
For these reasons, we believe that copyright protection should be
provided for M^orks distri]>uted under chai)ter 23, title 15, similar to
that provided under ^ 290(e), chapter 7(a), title 15, for standard
reference data prepared by the Departmen.t of Commerce under the
provisions of that chapter, or in the alternative that the Congress
reconsidpr the statutory requirement that the services and functions
provided under chapter 23 by NTIS be self-sustaining and self-
liquidating.
Turning to the question of preemption, we agree with the preemp-
tion of State copyright laws pursuant to section 301(a), and with
165
the principle embodied in that section that there shoiikl be a single,
Federal system for copyright. However, the language of subsection
(b) (3) of section 301 should, in our view, be modified to make it clear
that the phrase "all rights in the nature of copyright" will not b©
construed to preem})t parts of the State law of unfair competition
which are now codified in statute or established by Federal and State
court decisions applying the common law. _ .
Section 301(b) (3) is intended to exempt State unfair competition
law from the preemptive effect of section 301(a). Among the rights
and remedies not preempted are those arising from the violation of
rights "not equivalent to any exclusive rights within the general scope
of copyright." These "not equivalent" rights are said by the bill to
include "breaches of contract, breaches of trust, invasion of privacy,
defamation, and deceptive trade practices such as passing off and false
representation." The problem we have is that this listing is incom-
plete, and the language is more limited than that which would de-
scribe the present scope of established State unfair competition law.
As a solution, we propose a more comprehensive and inclusive listing
of unfair competition torts in subsection (b) (3) . The proposed amend-
ment :
(3) Activities violating rights that are not equivalent to any of the exclusive
rights within the general scope of copyright as specified by section 106, including
breaches of contract, breaches of trust, invasion of privacy, defamation, and
acts, trade practices, or courses of conduct which cause or are likely to cause
confusion, mistake or deception, or which are likely to result in passing off, false
or misleading representations, disparagement, wrongful disclosure or misappro-
priation of a trade secret or confidential information, or activities which otherwise
constitute unfair competition by misrepresentation or misappropriation.
In our opinion, this proposed amendment would more accurately
stat*^- the range of unfair competition torts which are now regulated
by the States, so that the examples listed will not be limiting.
It should be noted that the phrase "unfair competition by * * *
misappropriation" is included in our amendment. Obviously, the
"misappropriation" of all of the words of a literary work would be
in the nature of copyright, and State laws in this area should be pre-
empted. However, we do not believe that the entire body of State
unfair competition law based upon the landmark Supreme Court deci-
sion in rnfernat'/onal Neivs Service v. Associated Press (248 U.S. 215
(1918) ) should be preempted. While some State decisions relying on
the lA^iS case may be held inapplicable under section 801(a), we be-
lieve that such a remedy should continue to be available for the type
of conduct proscribed in the IiVS case.
Turning to the third point in title I, the proposed section 601. known
as the "manufacturing clause," essentially requires that English lan-
guage, nondramatic literary works by American domiciled authors
must be pi'inted in tlie United States or Canada. The present copyright
statute does not include such a reference to Canada. The rationale for
including Canada appears to be that wage standards in the United
States and Canada are comparable.
We are opposed to the inclusion of Canada in this provision. Such
an inclusion would be a unilateral concession which we believe should
be withheld for possible use by the United States as negotiating lever-
age in seeking compensating benefits during multilateral trade nego-
tiations. We note that both Houses of Congress indicated forcibly that
166
U.S. negotiators should obtain reciprocity for U.S. concessions when
they enacted the Trade Act of 1974, at the end of the last Congress.
Additionally, including Canada in this provision would raise prob-
lems in our relations with other nations, in view of the "most favored
nation" obliirations in the General Agreement on Tariff and Trade
(GATT) and other treaties. Thus, enactment of the bill containing
this provision might bring about the possibility of retaliation against
the United States from countries other than Canada and might other-
Avise hamper our efforts to eliminate nontariff trade barriers in the
interest of our overall international trade objectives.
If I may turn to title II of H.R. '2223, that would provide a new
system for the protection of original ornamental designs of useful
articles.
Designs eligible for protection under this title would have to be orig-
inal. They cannot be staple or commonplace, or elements commonly
used in the relevant trade, or dictated by utilitarian functions, or three
dimensional features of wearing apparel. However, there would be no
requirements that the design be new, and therefore no search of prior
designs would be necessary in order to grant protection.
Title II would provide protection only against copying by others
and Mould not give an exclusive right in the design itself. The term of
protection would be for 5 years, renewable for one additional 5-year
lenn.
Infringement would include making, importing, selling, or distrib-
nting for sale an article having a design copied from a protected
design. Importantly however, an innocent seller or distributor would
be an infringer only if he failed to reveal his source and then reordered
the article after having received a personal written notice of the design
protection.
This is a greatly reduced level of liability when compared with that
contained in title I where a seller or distributor is liable as an infringer
for the sale of a single unauthorized copyrighted work.
Design patent protection would continue to be available, but a design
patent and design protection under this title could not be maintained
concurrently. Also, copyright protection for designs would be con-
tinued, except that if copyright protection and a design registration
were obtained, the copyright protection would not extend to utilization
of the design in the useful article protected by the design registration.
Today, original ornamental designs for useful articles may be eligi-
ble for Federal protection under the patent laws or in som.e instances,
under the copyright law. In recent years, however, it has been gen-
erally agreed that the design patent laws do not provide adequate pro-
tection against design piracy. Because of the relatively short-lived
popularity of many designs, a patent in some cases cannot be secured
quickly enough to provide any useful protection.
The" expense in obtaining a design patent today results primarily
from the fact that the Patent and Trademark Office must examine an
application to determine whether it is "new, original, and ornamental."
At tlie present time it takes almost 2 years to obtain a design patent.
Until the patent is granted, the designer or manufacturer markets the
design at liis own peril, subject to it being freely copied. The alterna-
tive of withholding the design from the market until the patent issues
167
is impractical in many industries where styles change rapidly and may
even be seasonal.
Since the Supreme Court decision in Mazer v. Stein in 1954, the
Copyright Office has accepted an increasing variety of registrations
for designs embodied in useful articles so long as they meet the criteria
of being artistic. However, there are still many types of designs for
which copyright protection is unavailable, for instance, furniture and
appliances. Moreover, the term of protection in the proposed copy-
right law, life of the author plus 50 years, or even the present law, 28
years, is much too long for industrial designs which have a relatively
short commercial life.
To exemplify the problems that exist under current practice we
note complaints from domestic manufacturers that their designs have
been copied m certain foreign areas, particularly in the Far East, The
imitations are then imported into and sold in the United States
where they often enjoy a considerable price advantage over the article
produced here. We believe that title II fills the need for more effective
protection for design originators from this type of unfair competition
because it provides quick, inexpensive, and short-term protection for
original designs.
The Department of Commerce favors this legislation. However, we
would like to highlight some of our specific recommendations which
will bring title II of the bill more in line with other intellectual prop-
erty protection botli nationally and internationally and will generally
improve the protection offered.
Section 204(a) provides that protection for a design shall begin
on the date when the design is first made public. In subsequent sections
it is made clear that the design must be made public before an applica-
tion for protection can be filed. This provision will put U.S. residents
at a disadvantage if they desire to obtain protection of their design in
foreign countries, many of which, for example, Japan, refuse protec-
tion for a design which has been made public prior to the filing of an
application for registration.
In order to prevent the possible loss of protection in foreign coun-
tries, it should not be required that the design be made public prior to
registration. Instead, protection should commence on the date that the
registration is published in the United States as provided for in sec-
tion 212(a) of the bill. Protection which begins when the registra-
tion is published would provide notice to the public and would not
penalize the person desiring to protect his design outside of the United
States. This would also make title II consistent with title I which has
eliminated the prior publication requirement for copyright protection.
Specific statutory language to effect this change will be submitted to
the Congress at a later date.
Section 20D appears to limit an application to a single design. This
limitation appears to be unnecessary. An application containing 10 or
20 designs would be no more difficult to process than an application con-
taining 1 design because no search of prior designs is necessary. A
multiple design application would save the applicant paperwork,
thus, save him time and money. It would also save the Administrator
processing time over an equal number of single applications. This
might result in a lower fee per design. As long as a separate fee is paid
168
ior each design contained in the application there would be no loss of
revenue and both the applicant and the Administrator would benefit.
We have therefore recommended that multiple design applications be
p-^iTnitted under this title.
Title II requires that the application be accompanied by a statement
setting forth facts about the design, and that such statement be un-
der oath. Similar requirements in title 35, United States Code, cover-
ing patent and trademark practices, permit such required statements
to be submitted with a written declaration in accordance with 18 U.S.C.
1001 making a false statement punishable by a fine or imprisonment
and jeopardizing the validity of the document. We believe that such
a provision should be applicable to the application for design registra-
tion. Therefore, such declaration should be permitted in lieu of an
oath.
The present fee provisions of section 215 of this title are unaccept-
able to the Department of Commerce. In our opinion, the design i"eg-
istration system should be completely self-supporting because the bene-
fits of the design registration system only accrue to the individual
I'ecipient of the registration. Thus, the public should not be expected
to bear any portion of the expense of a design registration system.
Their benefits are too remote.
In a study done in 1964, the $15 fee for the design registration under
a bill similar to the present one, was found to be inadequate to provide
100-percent cost recovery. The $15 application fee would be even more
inadequate today.
Rather than propose different fee levels for each of the functions
specified, the Department of Commerce proposes that section 215 be
amended in its entirety to give the Administrator the discretion to
establish charges sufficient to recover 100 percent of the cost of opera-
tion of the design registration system. A similar approach is currently
being considered by Congress in various bills to revise the ])atent laws.
Mr. Kastenmeier. Thank you, Mr. Tegtmeyer. Who is the adminis-
trator under this particular pi'O vision ?
Mr. Tegtmeyer. The administrator would be designated by the
President if the bill were passed in the form it is.
Mr. Kastenmeier. Is it presumed that such an administrator would
be separate or part of the Copyright Office or the Patent Office or
what?
Mr. Tegtmeyer. The assumption is that the administrator would he
with the Patent and Trademark Office in the Department of
Commerce.
Mr. Kastenmeier. Why are we unable to modify the patent laws to
otherwise effect more reasonable treatment of design applications so
that this whole title would be unnecessary, so it could be handled under
the present law ?
Mr. Tegtmeyer. We presently have that objective, to reduce that
pendency for utility and design patents to 18 months. Even though that
time is lagging a little bit we expect that that wait will be reduced to
18 months in the very near future. The reason for requiring that length
of time is the fact that we must examine the application to determine if
it meets the criteria set forth in the ]n-esent statute and this cannot be
done during the short period in vv'hich you can register a design.
Mr. Kastenmeier. Would the administrator be under the Commis-
sioner of Trademarks and Patents for the j^urpose of direction?
169
Mr. Tegtmeyer. I'm not attempting to presume that the President
would in fact designate the Patent and Trademark Office as admin-
istrator but it would presumably be placed there, under the Com-
missioner of Patents and Trademarks, if it was placed there at all.
Mr, Kastenmeier. Are you satisfied that title II is to be considered a
part of the general revision of the copyright law or do you think it
more appro])riate that it ought to be considered by itself ?
Mr. Tegtjueyer. We are satisfied that it is to be considered as a gen-
eral part of the copyright laws.
Mr„ Kastenmeier. Do I understand that the revisions that you sug-
gest are unlike patents in that you would go by first to file criteria
rather than a first to invent ?
Mr. Tegtmeyer. We're talking about a requirement in order to ob-
tain protection as to origination, the party that originates the design
and filed and application therefore could obtain the protection; noth-
ing would prevent someone else from initiating the same design and
also obtaining the same protection.
Mr. Kastenmeier. I read your statement which says that instead pro-
tection should commence on the day that the registration is published
as a deviation from the theoiy that a copyright patent protection is
other than the rest of the world, it is in essence a first to file protec-
tion or, in this situation, publication rather than the first use of a
design ?
Mr. Tegtmeyer. Yes, in some respects.
Mr. Kastenmeier. This is a matter of understanding, I guess. You
state that the designs to be eligible would have to be original, however,
there are no requirements that the desigii be new. What is the distinc-
tion, the practical distinction, for our purposes?
Mr. Tegtmeyer. The distinction would be that if you originated a
design that somebody else originated in the past or created in the past.,
then you may still obtain protection so long as you were not copying
the former individual's design and you developed it totally inde-
pendently through your own originality.
Mr. Kastenmeier. I see. The other part of your testimony, do I
understand, that unlike others who have testified, you support reten-
tion of the manufacturing clause basically so it can be used essentially
as a negotiating factor ?
Mr, Tegtinieyer. I think our views are very similar to those of the
Department of State. There is an opportunity here to use exceptions
to the manufacturing clause for the purposes of negotiation in multi-
lateral trade negotiations when they take place. Such negotiations are
beginning to take place now and will begin on a more formal basis
later in the year.
Mr. Kastenmeier. Maybe I misunderstood. I understood them to sug-
gest that the existence of the manufacturing clause causes us a great
deal of difficulty. I did not understand that they wanted it retained to
use as leverage for future negotiations.
Mr. Tegtmeyer. We would agree with the elimination of the manu-
facturing clause over possibly a period of time as they indicated in
response to your question. Our point about negotiations was pri-
marily that, if the manufacturing clause was to stay and if Canada
was to be placed in it, we ought to obtain some compensation for add-
ing the exemption for Canada in multilateral trade negotiations.
57-786 — 76 — pt. 1 12
170
Mr. Kastexmeier. Do you not understand those who have thus far
designed the copyright bill to specifically exclude State unfair com-
petition laws for a reason ?
Mr. Tegtmeyer. I mentioned in the testimony that we agree with
the preemption of the State laws as to copyright-type protection but
feel that the bill should not upset the present protection that is avail-
able under State statutes and the common law of unfair competition.
We specifically mentioned the International News case in this comiec-
tion. That case represents an example of one area wliich we partic-
ularly feel should not be preempted by the copyright law because the
copyright law does not provide the same nature of protection that the
International Netos case decision does.
That is, the content of the news was protected in that case as opposed
to the wording or manner of expression of the news.
Mr. Kastenmeier, On that point, have you conferred with the Copy-
right Office or any other Federal agencies ? Do you find them in agree-
ment with your position?
Mr. Tegtmeyer. We have been in contact with some other Federal
agencies and in contact with the Copyright Office, as well. We have
not found agreement with our position on all points.
]Mr. Kastenmeier. Thank you. I yield to the gentleman from Il-
linois. Mr, Kailsback.
Mr. Railsback. Mr. Tegtmeyer, I find myself in somewhat of a
dilemma ; who actually speaks for the administration ?
There seem to be disagreements with virtually everybody. We have
the Department of State disagreeing with evervbody except on the
manufacturing clause and now we have the Department of Commerce
that takes a different view. Does anyone purport to speak for the
administration?
Mr. Tegtmeyer. Our testimony only purports to speak for the De-^
partment of Commerce.
jNIr. Railsback. The Justice Department testified with respect to
title II that they were concerned that this title would afford some new
protection, but it would not include a finding of novelty or obvious-
ness ; wliat do you think of that ?
]Mr. Tegtmeyer. Copyriglit law presently, and as proposed in title
I. does not require a test of novelty or unobviousness for protection.
The test applied in the design legislation is one of originality. In-
fringement is accomplished by copying the desigTi literally rather
than by separate origination. So the protection provided by title II
is more in the nature of copyright j^rotection rather than patent.
Mr. Railsback. So, you would disagree that a finding by the Gov-
ernment of unobviousness is needed ?
]\Ir. Tegtimeyer. Yes; we do. The bill provides protection in one
area that would not be protected by the present patent laws and
where there is design piracy occurring. Protection under title II is
desirable because of the requirement of novelty and unobviousness
in the patent law and because of the fact that the copyright laws
as they exist today have not been extended to cover all of the designs
that are covered in the proposed legislation in title II.
]\rr. Railsback. You are not, I presume, suggesting that your De-
partment favors section 601 ? I think Mr. Kastenmeier asked you and
171
you appeared to indicate primary concern, about the inclusion of
Canada but, you don t favor a munuiacturing clause, or do you ^
Mr. Tegtmeyer. V\ e do not favor a numufacturintr clause aside from
the question as to whether or not Canada should be exempted.
Mr. Kau.sback. So in that respect your testimony is not at variance
with the other agencies ?
Mr. Tegtmeyer. No.
]Mr. Kailsback. If you can keep track of all of that differing
testimony.
Mr. Tegtmeyer. AVe did make the additional point of saying that if
Canada was to be included as an exception in the manufacturing clause
that it be done by the use of its exception in negotiations with other
countries as leverage to get something in return.
Mr. Railsback. You do favor, do you not, the prepared expansion
of the duration of a copj'right ?
]\Ir. Tegtmeyer. Yes; we do. In that respect, I might point out that
we have reviewed the reasons for extending the copyright term that
were set forth in one of the earlier reports on copyright revision legis-
lation. I might note, in particular, Eeport No. 83 from the 90th Con-
gress first session. It is a report of the chairman, Mr. Kastenmeier,
for the Committee on the Judiciary. On pages 100 through 103 there
are a num.ber of what we feel are well- justified reasons for extending
the term of copyright to life of the author plus 50 years. In the report,
there are some seven such reasons listed. The committee at that time
stated, and I quote from page 102 of the report, "The committee
concluded that the need for a longer total term of copyright had been
conclusively demonstrated."
Later in the report it stated, "The committee has concluded that
an author's copyright should extend beyond his lifetime and, judged by
this standard, the present term of 5G years is too short." There are
some seven reasons set forth which we feel are consistent with the
purpose of the copyright law, that is to further creativity in writings
and so forth under the Constitution.
Mr. Railsback. I think you've been very helpful.
jSIr. Kastenmeier. Mr. Danielson.
'Sir. Daxielsox. Do you know whether foreign states have a com-
parable provision to our title II to protect original ornamental designs ?
Mr. Tegtmeyer. Most foreign countries have a provision similar
generally, at lefist, to title II and there is an international convention.
The Hague Agreement for the International Deposit of Industrial
Designs. I am not sure of the number of countries involved.
Mr. Daxielsox. Are we a party ?
Mr. Tegt3Ieyer. No. I am not sure whether we would want to be be-
cause of certain provisions in the convention.
Mr. Daxielson. One problem I have, one of the provision qualifiers
is that it be ornamental ; isn't that almost entirely subjective ?
Mr. Tegtmeyer. Essentially, it is the type of test as applied under
the copyright law presently with respect to desigrns.
Mr. Daxielson. But beauty is still in the eye of the beholder and I
have a problem with this. I don't know. I need an answer to this, I
need convincing. Thank vou.
172
Mr. Tegtmeyer. If I may add one point that may be helpful, one
thing you can do is to compare the fact that it must be ornamental as
opposed to functional.
Mr. Daxielson. Yes ; but it is also, as I read the Code provisions, I
think it relates to prettiness or beauty ; I have a problem with this.
Mr. Tegtmeyer. That's not the intent of the provision as we under-
stand it.
Mr. Drinan. I wonder if I might ask one question. If you would
just give us an example. How many of these fundamental things you
have described could or would get a copyright or patent I
Mr. Tegtmeyi:r. That would be difficult to predict because you don't
laiow whether or not they would meet the test of novelty for patent
protection.
Mr. Drinan. In your testimony you suggest only two areas and they
are furniture and appliances. But, you give us a for instance on what
type of tilings might come under title II ?
Mr. Tegtmeyer. Linoleum and wall coverings, which I believe are
covered under the present copyright law as it is interpreted, as well
as furniture designs, appliances and other household goods which
would have a design, an original design.
Mr. Drinan. Do you fear any possibility of restraining trade or
even monopoly ?
Mr. Tegtmeyer. We feel the protection is in the nature of a copy-
right provision and is only against copying. If you compare it to
piracy of tapes and records, we find it very similar. We are talking
about someone who has pirated or copied a design, not somebody who
has independently originated it himself.
Mr. Drinan. I tend to agree with ISIr. Eailsback that there is too
much confusion, but your testimony has been helpful. I wish we had
longer.
Mr. Kaskenmeier. On behalf of the committee, we appreciate your
appearance again before us on a slightly diif erent type of bill than you
normally appear before us with and we wish to thank your col-
leagues. This concludes the testimony this morni)ig on the subject of
the revision of copyright laws. We shall next meet as a subcommit-
tee on ]May 14, Wednesday at 10 a.m. in room 2226 for further hear-
ings.
[Reports on H.R. 2223 were received by the subcommittee from the
Department of State, the Acting Librarian of Congress, and the Na-
tional Aeronautics and Space Administration, as follov/s:]
Department of State,
Washington, D.C., May 7, 19'75.
ITon. Peter W. Rodino, Jr.,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, D.C.
Dear Mr. Chairman : The Secretary has asked that I respond to your letter of
February 10, 1975, requestin.e: the Department of State's views on H.R. 2223,
for the general revision of the Copyright Law, Title 17 of the United States
Code, and for other purjjoses.
The first copyright law of the United States was enacted by the Fir.st Congress
in 17f)0, with comprehensive revisions being enacted at intervals of about 40
years, in 1S31. 1870 and 1909. The present U.S. copyright law, title 17 of the
United States Code, is basically the same as the Act of 1909. During the ensuing
yeai's tremendous strides have been made in technology and te<.'hni(iues for
communicating printed matter, vi.sual images, and recorded sounds. The.se te<"h-
nical advances have generated new industries and methods for the reprotluetioa
173
tind dissemination of copyriglited works and new business relationships have
developed between authors and users. Although these two groups have differed
on various issues, both recognize the 1909 statute does not stimulate authors to
create or reward them for their efforts and fails to consider present or future
technological developments in communications.
Although we tali;e exception to one section of H.R. 2223, the Department other-
wise supports the enactment of this important legislation. Our comments on
H.R. 2223 are directed to those sections which relate to the conduct of our foreign
relations and therefore are of interest to the Department. These sections are the
following: Section 104 concerning subject matter of copyright and national
origin ; Section 302 on the duration of protection, and Section 601 relative to
restrictions against importation of certain copyrighted materials from other
countries.
ISectlon 10^. Subject Matter of Copyright: National Origin — (c) .
Tlie Department supports the aim of tliis section which is to deal with the
possibility that action may be instituted in L-uited States courts by a foreign
government to divest its citizens or autliors of rights to their works or block
publication of their works within the United States. We do not have any evidence
tliat an action of this nature is likely to occur. If it did, however, it would rep-
resent undesirable official interference with the freedom of expression, and we
therefore believe that it should be guarded against. The international copyriglit
system embodied in the Universal Copyi'ight Convention is intended to '"insure
the respect for the rights of the individual and encourage the development of
literature, the sciences and tlie arts". The obligations contained in the Convention
.shouUl not become the vehicle to suppress free communication in tlie United
States of ideas and literature unacceptable to authorities of some signatories
to the Convention.
Were such a provision to be enacted, it would be necessary to avoid language
which might inadvertently interfere with legitimate governmental acquisition
of copyright. We understand tliat otlier U.S. Government agencies are drafting
language to meet the purpose of Section 104(c) in a technically different manner.
We have not reviewed these proposals and are unable to express our opinion
as to their merits. However, we support the aim of appropriately drafted legisla-
tion that would deny effect in United States courts of a foreign nation's laws or
practices desigiied to deprive the authors of that country of the rights to publish
and protect their literary and artistic works in the United States.
Section 302. Duration of Copyright: TTorfcs Created on or after January 1, 1915.
Section 302 concerns the duration of copyright (i.e. term of protection) and is
one of the most important provisions, if not the most important in the revision
bill. Basically, Section 302(a) provides for a copyright term consisting of the
life of the author and 50 years after his death. The importance of the provision
is borne out l)y the fact that the Register of Copyrights regards a "life-plus-.iiO
term" as the "foundation of the entire bill". Such a term of protection would be
more consistent with the practice of a very large ma.iority of other countries
that are members of the international copyright community. This provision would
also remove a major obstacle to the possible adherence to the Berne Convention
for the Protection of Literary and Artistic Works by the T'nited States, Article
7 of which requires states party to the convention to provide such a term of
protection. Such a change would facilitate and simplify international copy-
right protection for U.S. nationals. Therefore, the Department of State strongly
supports the duration of copyright protection as proposed in Section 302.
Section 601. Manufacture, Importation and Puilic Distriltution of Certain
Copies.
Section 601 relates to the so-called "manufacturing clau.se" which is designed
essentially to protect the U.S. printing industry. ITnder Section 601 the importa-
tion into or the distribution within the U.S. of English language copies of cer-
tain works whose authors are U.S. nationals (living in the United States) or
domiciliaries would be prohibited unless the copies are produced in, or made
from type set in, or plates made in, the United States or Canada. Also com-
pliance with the manufacturing requirements no longer would constitute a
condition of copyright protection ; the effects of noncompliance would be limited
to rights with respect to reproduction and distribution of copies. Section 601(d)
provides a complete defense in any civil action or criminal proceeding for in-
fringement of the exclusive rights of reproduction or distribution of copies where^
174
Tinder certain circumstances, the defendant proves Tiolatiou of the manufactur-
ing requirements.
The Department notes with satisfaction that, on the whole, there has been
a liberalization of the manufacturing clause as it exists today. For example, a
violation of the manufacturing clause as regards a book would not affect the right
of the copyright proprietor to authorize a motion picture version or other use
of the book. It would merely affect enforcement of copyright with respect to
publication as a book. Further, the number of copies manufactured abroad that
may be imported has been increased from 1,500 to 2,000.
Despite this liberalization, Section 601 would continue the protectionist fea-
tures of the manufacturing clause. This kind of protection is fundamentally
inconsistent with basic U.S. policy in international trade. For several decades
we have pursued a policy of reducing tariffs and other trade barriers in the
interest of promoting an open international economic system. We believe that
the broad trading interests of the U.S. and its people continue to be best served
by a general reduction of trade barriers including non-tariff barriers. This is
the policy we are carrying forward in the current multilateral trade negotiations
being undertaken in Geneva under the authority of the recently enacted Trade
Act. During this round of negotiations attention will be focused particularly
on non-tariff barriers, and one of our major negotiating objectives will be to
reduce or eliminate non-tariff barriers of other countries which restrict U.S.
trade. We believe that it is important to note this inconsistency in consider-
ing the continuation of the manufacturing clause.
Furthermore, the exception for Canada introduced by this bill into the manu-
facturing clause would violate our obligations under the GATT and various
bilateral treaties. The United Kingdom has protested and we expect that other
foreign countries which are being discriminated against by this measure will
protest, thereby introducing another element of discord and potential retaliation
into our relations with those coimtries. Specifically, the exception would violate
our obligation under Article XIII of the GATT which requires non-discrimina-
tory application of quantitative restrictions. Although the U.S. could seek a
special waiver from the GATT Contracting Parties to permit this exception,
this procedure would be particularly undesirable at this time in view of the
opening of the new round of multilateral trade negotiations at Geneva. The
exception would also violate commitments in various Friendship, Commerce and
Navigation treaties, which we have concluded with most of the other industrial-
ized nations.
These treaties normally impose obligations on the U.S. before it introduces
non-tariff barriers on important products of the other country, and forbids the
prohibition of the other country's products unless the product of third countries
are similarly prohibited.
In conclusion, the Department of State believes that the updating of the U.S.
copyright law is most desirable and supports the enactment of H.R. 2223. A
modernization of the copyright law to take into account the important technologi-
cal advances in the copyright field is in the interest of all members of the copy-
right commimity. It is also important in bringing the United States in step in
copyright with the other principal countries of the world.
The Oflice of Management and Budget advises that there is no objection to
the submission of this report.
Sincerely yours,
Robert J. McClosket,
Assistant Secretary for
Congressional Relations.
The Librarian of Congress.
Washington, D.C., August 26, 1975.
Hon. Peter W. Rodino,
Chairman, Committee on the Judiciary,
U.S. House of Representatives, Washington, B.C.
Dear Mr. Rodino: This refers to your reque.st for llie views of the Library of
Congress and the Copyright Office on H.R. 2223, a bill for the general revision
of the Copyright Code, title 17 U.S.C, for the establishment of protection of
ornamental designs of useful articles in the form of the Design Protection Act,
and for other purposes.
The current bill is the latest in a series of bills pending in Congress since 1905
to effect a general revision of the Copyright Code. H.R. 2223, except for technical
175
amendments, is tlie same as the bill that passed the Senate in the 93rd Congress,
S 1361 93rd Congress, 2d Session (1974), by a vote of 70 to 1. The Kastenmeier
bill (HR 2223) is also substantially identical, except for Chapter 1, to the bill
passed by the House of Representatives in 1967, H.R. 2512, 90th Congress, 1st
Session. , x ^ ^.-^ j ^r - m—
The Register of Copyrights, Barbara Ringer, and I testified on May <, 19(o
before the House Subcommittee on Courts. Civil Liberties, and the Administration
of Justice and urged enactment of the revision bill in this Congress. We reiterate
the strong support of the Library of Congress and the Copyright Office for this
bill. As Ms. Ringer remarked in her testimony before the Subcommittee: "A
Twentieth-Century copyright statute is long overdue in the United States, and
the present need for a revised law that will anticipate the Twenty-First Century
is so obvious as to be undeniable."
The Register of Copyrights has submitted to the House Subcommittee chaired
by Mr. Kastenmeier a series of brief, objective analyses of the key provisions of
the bill. She is also preparing a supplemental report on the revision bill and plans
to submit this to the Committee on the Judiciary in early fall. I shall therefore
confine my comments to general support of the copyright revision bill, reference
to the recent changes by the Senate Subcommittee on Patents, Trademarks, and
Copyrights, specific mention of a few recommended changes in title I, and general
support for title II.
1. GENERAL COMMENTS ON TITLE I
The current copyright revision effort began twenty years ago. The basic bill
has been under legislative consideration for more than ten years. However, active
consideration of the bill has peaked at different times in each house, and the
House of Representatives has not considered the bill thoroughly since LI.R. 2.512
passed the House in 1967. The exceedingly careful preparation of the study and
drafting phases of the revision program is reflected in the strength of the "basic
bill," which has remained intact since the House last considered it. For example,
the following fundamental provisions of the bill have stood the test of time : a
single national system for copyright protection under the Federal copyright
statute; provisions governing the term of new works and subsisting copyrights;
limitations on the assignment of an author's right ; copyright formalities, includ-
ing notice, deposit, and registration : copyright infringement provisions ; and
housekeeping provisions affecting the Copyright Office and the registration
system.
Enactment has been delayed because of a few issues concerning the scope of the
exclusive rights granted under the bill and limitations to those rights. For many
years, the key issue was the limitations on the exclusive rights affecting secondary
transmissions, principally cable television. Other issues, such as library photo-
copying, computer uses of copyrighted works, public broadcasting, and educa-
tional uses of copyrighted works in general have waxed and waned.
Now that cable television litigation seems to have run its course, this issue is
ripe for a legislative solution. The Williams & Wilkins v. United States, 487 F.2d
1315 (Ct. of Claims 1973 aff'd by equally divided court, 420 U.S. 376 (1975) ) litiga-
tion over library photocopying has ended inconclusively. In both instances, the
courts have urged legislative solutions for the complex problems caused by the
impact of new technology on an antiquated copyright law.
The Libraiy of Congress and the Copyright Office are ready to provide what-
ever assistance the Committees or Members of Congress wish in presenting bal-
anced explanations of the provisions of the bill or of additional proposals. With-
out endorsing particular solutions, we do endorse wholeheartedly the general
concept of reasoned discourse and debate on the issues and good faith attempts
to reach compromise positions, followed by a Congressional decision on the
particular proposals. We genuinely believe that these problems are capable of
solution. We also believe that an effective copyright system is not likely to survive
further delay in enacting a revision of the 1909 law.
2. SENATE ACTION ON S. 22
The Senate Subcommittee on Patents, Trademarks and Copyrights reported
a companion bill. S. 22, to the Senate Judiciary Committee on June 13. 1975. We
should like to bring to your attention the substantive changes in the Senate bill.
Royalty Tri'bvnal. — ^The Senate Subcommittee has restored the provision in
sections 801 and 802 for periodic review of the royalty rate for jukebox uses of
copyrighted works.
176
Federal pre-emption. — The Subcommittee has accepted an amendment to sec-
tion 301 specifically reserving state law protection for misappropriation of copy-
riirht subject matter provided the relief is not equivalent to any of the exclusive
rights within the general scope of copyright.
ProhiMtion against involuntary transfers. — The Subcommittee has replaced
the provision prohibiting expropriation of copyrighted works in section 104(c)
with a new provision in section 201(e) prohibiting involuntary transfere.
HingJe registration for several contributions to periodicals. — Two new sub-
paragraphs have been added to section 408(c) authorizing a single registration
for contributions to a periodical by the same individual author under certain
conditions.
Fee schedule. — A new schedule of fees has been added to section 708.
Voluntary licenses for use of copyrighted works by the blind and physically
handicapped. — A new section 710 has been added directing the Register of Copy-
rights to establish by regulation standardized procedures under which the copy-
right owner grants voluntary licenses to the Library of Congress for the repro-
duction of certain nondramatic literary works for use by the blind and physically
handicapped.
Noncommercial broadcasts to handicapped audience. — A new clause (8) has
been added to section 110 exempting the performance of a literary work on non-
commercial radio and television stations to a "print or aural handicapped
audience."
Derivative work right for sound recordings. — Section 114 has been amended to
include among the rights granted to the copyright owner of a sound recording the
right to prepare derivative works.
Criminal penalties. — Several amendments proposed by the Justice Department
were adopted. The punishment for criminal infringement of a sound recording or
motion picture copyright has been increased from one year to 3 years for tlie
first offense, and from two years to seven years for subsequent offenses, section
506(a). A new subsection has been added to section 506 adding forfeiture and
destruction of copies as possible penalties for conviction of copyright infringe-
ment, -R-ithin the discretion of the court. A new section 50f» has been added pro-
viding for possible seizure and forfeiture by the United States Government of
infringing copies or phonorecords, including articles or devices used to carry out
the criminal infringement.
Title II. — Tile Subcommittee adopted a series of changes recommended by the
Department of Commerce with respect to sections 203-206, 209, 211-213, 227, and
229 of the Design Protection Act.
3. RECOMMENDED CHANGES IN TITLE I
Several of the amendments adopted by the Senate Subcommittee on Patents,
Trademarks, and Copyrights were either recommended by the Library of Congress
and the Copyright Office, or have been endorsed by us. We specifically urge adop-
tion of the following amendments.
Prohibition against involuntary transfers. — We recommend the language
adopted by the Senate Subcommittee in section 201(e) in lieu of the present
section 104(c) of H.R. 2223. The new language is intended to establish on a
statutory basis the principle that an involuntary transfer of the copyright in-
terest will not be recognized under our law. Of course, traditional legal actions
such as bankruptcy proceedings and mortgage foreclosures are not within the
scope of the recommended language since the author has, in one way or another,
consented to these legal processes by his actions. The ])rovision is no longer di-
rected against foreigii governments since the same princii)le applies to the United
States Government. While our courts have not addressed the precise issue of in-
voluntary transfer, we believe the principle of the proposed section 201(e) would
be followed by the courts in construing the present law.
Federal pre-etnption. — We endorse the change in section 301 adopted by the
Senate Subcommittee which is intended to clarify that misiippropriation relief
may be provided under state law as long as the protection conferred is not equiv-
alent to the exclusive rights granted by the copyright law.
Single registration for several contributions to periodicals. — The basic prin-
ciple of this provision was originally siiggested by Irwin Karp. Counsel for rhe
Authors' League. The Library of Congress and the Copyright OflBce recommended
it to the Senate Subcommittee, and the provision also appears in H.R. 7140 (by
Mr. Kastenmeier), which would amend the existing title 17 U.S.C apart from the
177
effort to effect a general revision of the copyriglit law. Separate original and re-
newal term registration is a substantial financial burden on individual authors
and artists who contribute small or short works to a variety of daily newspapers
and other periodicals. The pi-oposed amendment to section 408 (c) would specif-
ically authorize the Register, without prejudice to her general authority, to
establish regulations permitting grouping of contributions by the same individual
author for registration purposes.
Fee sehedule — section 708. — The new fee schedule adopted by the Senate Sub-
committee also appears in H.R. 7149. introduced by Mr. Robert W. Kastenmeier
on May 20, 1975 at tlie request of the Library of Congress and the Coiiyright
OflBce. 'We found it necessary to propose general increases in the fee schedule iu
view of the low ratio of recovery of the costs of the copyright registration system
by cash receipts for services performed. We strongly urge inclusion of the new
fee schedule i\i H.R. 2223. We also take this opportunity to urge separate enact-
ment of H.R. 7149 without awaiting general revision of the copyright law. The
revision bill cannot become effective immediately upon enactment because of the
administrative preparation required to implement its provisions. Hence, we favor
enactment of H.R. 7149 as soon as possible.
Voluntary licenses for use of eoiryriglited works hy the hlind and physically
handicapmd — new section 710. — This provision also originated with the Library
of Congress and the Copyright Otiice, and we urge its addition to the revision
bill. It has tlie support of the American Association of Publishers.
Universal Copyright Convention. — We propose a technical amendment to sec-
tion 104(b) (2) in view of the 1971 revision of the Universal Copyright Conven-
tion. Line 25 of page 7 should read "1952 or 1971 Universal Copyright Convention ;
or".
4. GENERAL COMMENTS ON TITLE II
Design legislation has been pending before Congress even longer than the
current efforts at omnibus copyright revision. Title II of H.R. 2223, the Design
Protection Act, represents the current version of design legislation. The pro-
posal has been refined through years of study, debate, consideration, and amend-
ment. The Library of Congress and the Copyright Office have supported this
le.idslation in the past, and we reiterate our strong endorsement of the present
bill, esi)ecially since the present version appears to resolve many issues that de-
layed enactment of separate design legislation.
The Design Protection Act would create a new form of protection for designs
based' upon modified copyright principles and would bridge the gap between
existing design patent and copyright protection for ornamental designs of useful
articles. This new form of protection is needed to correct deficiencies in tlie
protection accorded by existing law. For example, although the Copyright Office
registers certain ornamental designs of useful articles which qualify as "works
ofart," it must refuse registration for numerous equally actractive or meritorious
designs, because they do not display separate work of art authorship apart from
the utilitarian aspects of the article. On the other hand, design patents are .iudged
by the high patent standards of novelty and non-obviousness. The patent is
difllcult and expensive to obtain, and most designs do not survive a court t^st.
The Design Protection Act avoids these pitfalls. It is specifically tailored to
meet the demonstrated need for protection of ornamental designs of useful
articles with due regard for the interests of consumers and their reiiresentatives.
the product retailers. The bill adopts the copyright standard of originality, but
the term of protection is short in consideration of the public interest in free com-
petition among product designs.
We accept in general the amendments adopted by the Senate Subcommittee
with respect to title IT. However, we have some hesitation about the amendment
to section 203. adding the requirement that protection may be accorded to a-
revision, adaptation, or rearrangement of design subject matter only if tlie
changes are substantial. We agree with the amendment provided the substantiality
of the revision is judged by traditional copyright standards of originality. We
would not support the change if there is any possibility that it would be con-
strued to establish a stricter standard of originality than that establislied in
section. 201 (b) (4). If the House .Tudiciary Ccmimittee adopts this language, we
recommend a clarification in the report that the amendment in no way derogates
from the section 201 (b) (4) standard of originality.
Finally, we point out that the bill presently doe? not indicate which agency will
administer the Design Protection Act. Under section 230, the Administrator will
178
be desigTiated by the President. In order to assure administrative preparation
for implementation of the Design Protection Act, the Congress may wish to
designate the Administrator directly in the bill. The Copyright Office would be
willing to assume this responsibility, as the Congress or, under the present bill,
the President directs.
Sincerely,
John G. Lorenz.
Acting Librarian of Congress.
National Aeronautics and Space Administration,
Washington, D.C., September o, 1973.
Hon. Peter W. Rodino, Jr.,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, D.C.
Dear Mr. Chairman : This is in further reply to your request for the views of
the National Aeronautics and Space Administration on the bill H.R. 2223, '"For
the general revision of the Copyright Law, title 17 of the United States Code, and
for other purposes."
Title I of the bill provides for a general revision of the United States Copyright
Law. title 17 of the United States Code. Title II establishes a new type of protec-
tion for original ornamental designs of useful articles. Set forth below are com-
ments on specific provisions of the bill which would have a direct impact on
NASA's activities and liability.
TITLE I
Government Works
The proposed legislation obviates some of the ambiguities present in the current
coi)yright law with respect to Govei-nment works. Sec. 105 of the bill prohibits
copyright in any "work of the United States Government," which is defined in
Sec. 101 as "a work prepared by an officer or employee of the United States Gov-
ernment as part of his official duties." The present law prohibits copyright in a
"publication of the United States Government" (Sec. 8), but does not define the
latter term. The proposed legislation adequately reflects case law and customary
practice within the executive branch, which have established that works prepared
by Government officers or employees as part of their official duties are "Govern-
ment publications" within the copyright prohibition.
Some previous copyright revision Inlls have defined a Government work as one
prepared by an officer or employee "within the scope of his official duties or em-
ployment." The latter was considered ob.iectionable because it was ambiguous and
subject to a much broader interpretation. For example, it could be construed as
prohibiting copyright even where an officer or employee voluntarily wrote a book
on his own time which was somehow related to his employment.
Sec. 105 also clarifies the right of the Government to receive and hold copy-
rights transferred to it by assignment, bequest, or otherwise, thus obviating an-
other uncertainty in the current law.
Since H.R. 2223 abolishes common law copyright protection and extends statu-
tory copyright protection to published and unpublished works ( Sec. 104 and Sec.
301), in our view the copyright prohibition of Sec. 105 would apply to both pub-
lished and unpublished Government works as this term is defined in Sec. 101.
NASA is still of the view, expressed in comments submitted to the Committee
on previou,sly proposed legislation (e.g., H.R. 43^7, SOth Congress. 1st Session,
1965), that copyright protection should be available for Government works in
exceptional circumstances. This would give NASA the opportunity to enter into
competitive negotiations with private publishing firms in exceptional cases so that
selec-ted NASA publications could receive the widest possible distribution as re-
quired by Section 203(a) of the National Aeronautics and Space Act of 1958. The
negotiating position of the Government depends on its ability to provide copyright
protection for a period of time to the publisher in exchange for distribution and
related services. If necessary, the rights of the Government to copyright in such
exceptional eases can be limited to a shorter period of time ; for example, 5 years
(rather than the full term), which may be sufficient time for the publisher to
regain his initial publishing costs. Accordingly, it is recommended that the fol-
lowing subsection be inserted in Sec. 105 :
"In exceptional cases, copyright may be secured in a published work of the
United States Government where, because of the special nature of the work or the
circumstances of its preparation, it is determined that copyright protection would
result in more effective dissemination of the work or for other reasons would be
in the public interest. The head of the Government agency for which the work was
179
prepared shall make the determination in each case in accordance with regula-
tions established by an administrative officer designated by the President, and
shall publish a statement of the basis for its determination in each case in the
manner specified by such regulations."
It is strongly urged that Sec. 105 be amended to specify that the copyright
prohibition for Government works apply only to domestic copyright protection.
This could be done by inserting the phrase "within the United States'' after
the word "available" in line 1 of Sec. 105. It is a commonly held opinion, al-
though not established by case law, that the prohibition .against obtaining copy-
right hx the Government applies to domestic copyrights only. Thus, in this
view, the Government may copyright abroad when that serves its best interests.
While we feel that many foreign signatories to the Universal Copyright Con-
vention would honor the copyright of the U.S. Government in their respective
countries under the Convention, some nations might take the position that a
U.S. Government work cannot receive copyright protection anywhere.
Thf basic rationale for prohibiting copyi'ight protection for U.S. Government
works is that American taxpayers have paid for these works through tax assess-
ments and should have access to them free of copyright restrictions. This ra-
tionale does not require a giveaway of U.S. Government works to foreign
nationals and foreign governments. Most foreign countries provide domestic copy-
right protection for publications of their governments, and publications of
foreign governments are accepted for copyright registration in the United States,
except for statutes, court opinions, and similar official dociiments which are con-
sidered inherently uncopyrightable. Among the benefits which would accrue
from asserting copyright abroad in selected U.S. Government works are: (a)
improvements of our negotiating position with certain countries; (b) royalties
could be collected, thereby .aiding our balance of payments; (c) protection
of the integrity of U.S. Government works; and (d) greater dissemination if
American publishers were licensed to distribute U.S. Government works through
ertablis^hed distribution outlets abroad.
It is also recommended that a subsection similar to that appearing in the
current law, 17 U.S.C. 8, be inserted in Sec. 105 of H.R. 2223. that is :
"Publication or other use by the United States Government of any material
ill which copyright is existing does not impair the copyright or authorize any
further use or appropriation of the material without the consent of the copy-
right owner."
It is believed desirable to retain such a provision in the statute to provide
assurances to authors and to preclude the argument th,at deletion of this pro-
vision from the present statute implies that such protection is no longer available.
Pre-emption With Respect to Other Laws
A key provision of Title I of H.R. 2223 is Sec. 301, which would establish a
single system of statutory protection for virtually all copyrightable works
whether published or unpublished. Under Sec. 301, a work would obtain statu-
t^fry protection as soon as it is "created" or. as the term is defined in Sec. 101,
when ir is "fixed in a copy or phonorecord for the first time."
Sec. 301(b) provides that nothing in the title annuls or limits any rights or
remedies under the common law or statutes of any state that are not equivalent
to any of the exclusive rights within the general scope of copyright, such as
breaches of contract. No mention is made of Federal statiites such as the Tucker
Act, 28 U.S.C. 1491, which permits suit against the Government for breach of an
express or implied contract. Undoubtedly, it was not intended that such a
Federal statute be preempted by the copyright revision. It is recommended,
thei-pfore, for clarification purposes, that Sec. 301(b) be amended by inserting
the phrase "under Federal statutes or" after the woi'd "remedies'" on line 1.
A similar omission occurs in Sec. 117 and it is suggested that the phrase
"title 17" be replaced by "this or other title of the United States Code."
Sec. 502'^ a) provides that any court having .iurisdiction of a civil action
arising under the title may, su'bject to the prorhions of section 1498 (b) of title
28. grant in.iunctions to prevent or restrain infringement (emphasis added). It
is recommended that the phrase "subject to the provisions of" be replaced by
"except in actions against the Government under" to clailfy the exclusive
jnri.«diction of the Court of Claims under 28 U.S.C. 1498(b) .
Unpnhlished Works
28 U.S.C. 1498 (b) provides for a cause of action against the Government for
infringement of "copyright in any work protected under the copyright laws of
the United States." This waiver of sovereign immunity has been construed not
180
to embrace common law copyright, i.e., iiupnhlished works. See e.g.. Porter et al.
V. United States, 473 F 2d 1329, 117 USPQ 238 (CA 5 1973). Since H.R. 2223
protects unpuhli.shed as well as published works, the Governments liability will
be extended. It is urged that 28 U.S.C. 1498(h) be amended so that it continues
to restrict the Government's liability for copyright infringement to "published"
works only. Government agencies receive a voluminous amount of material from
private sources which does not bear a copyriglit notice and whicli is reproduced,
distributed, etc. in its day-to-day business activities, for example, under the
Freedom of Information Act. It would be extremely difficult, if not impossible,
to ascertain whether the material sulmiitted has been published with no intent
to claim copyriglit, or whether it is unpublished and the owner intends to claim
copyright protection.
Tlie effect of compliance with the Freedom of Information Act (FOIA) on
the Government's lialiility for copyright infringement also needs clariticatiou.
If a document requested under the FOIA bears a copyright notice, the requester
can be so advised and will usually be able to secure a copy elsewhere. Where
the document requested contains no copyright notice, it may be an unpublished
work sul)ject to protection under the i)roposed copyright revision ; and providing
access or a copy may very well frustrate the copyright owner's de.-;ires and
subject the Government to liability. We are concerned whether the furnishing
of a copy of a document by the Government under the FOIA will be considered
excusable, or a form of fair use. Of course, if a document is released under
FOIA, the Government may not itself restrict its use by otiiers. For clarification
purposes, it is recommended that language l>e inserted in H.R. 2223 explaining
the fair use doctrine's applicability to unpublished works and the Government's
release of documents under the FOIA.
Innocent Infringers
Under Sec. 405(b) an innocent infringer who acts in reliance upon an
authorized copy or phonorecord from which the copyright notice has been omitted,
and who proves that he was mi^;led by the omission, is shielded from liability
for actual or statutory damages with respect to any infringing acts committed
before receiving actual notice of registration. No protection is spelled out in the
proposed legislation for an innocent infringer wlio relies on an unaiithrirized
copy or plionorecord of a published work from which tlie copyriglit notice has
been omitted ; or for an innocent infringer of an unpublished work, i.e., one
who relies on a copy or phonorecord which has been published without authority
of tlie owner.
Publications Incorporating Works in the Puhlic Domain
Sec. 403 of U.K. 2223 provides that when a work is published in copies or
phcnorecords consisting preponderantly of one or more Government works, the
notice of copyright shall also include a statement identifying the portions embody-
ing work protected under Title 17. It is NASA's opinion that Sec. 403 is too
limited and that it would be in tlie public interest to recpiire such a statement
also where a work consists preponderantly of any material that is in the public
domain. We recommend that Sec. 403 be amended by adding the phrase "or works
in the public domain" after the word '"works" in the heading and before the
words "the notice" in line 3 of the body of the section.
TITLE II
Our remaining comments are directed to Title II of II.R. 2223. It is assumed:
that the word "title" in the various sections refers only to Title II dealing with
ornamental designs. It is not apparent where Title TI will appear in the United
States Code. If Title II is pl.iced under Title 17. difficulties in construction may
ensue. For example, the definitions set forth in Title I of II.R. 2223 dealing with
copyrights might be construed as being applicable to Title II also.
It is suggested that paragraph (b) of 28 U.S.C. 1-J98 be amended to include
registered designs rather thon paragrnph (a). (See Sec. 232.) The process for
cr<'ating rights in registered designs is more closely analogous to copyrights.
Furthermore, tlie specific authorization for the administrative settlement of
copyright infringement claims set forth in paragraph (b) [and not present in
paragraph (a)l would be made applicable to registered designs, which in our
opinion is highly desirable.
ISl
In the event 28 F.S.C. 1-J98fa) is amended as set forth in Sec. 232, it is recom-
mended that the phrase "descrilied In and covered by a patent of the United
.States" be inserted after the word -invention" in the first line. This will reinstate
tlie language present in the current law with respect to patented inventions and
whicJi was probably inadvertently omitted. Omitting this language might be
interpreted as a broadening of the Government's liability to cover unpatented
inventions.
Subject to the foregoing, the National Aeronautics and Space Administration
would have no objection to the enactment of H.R. 2223.
The Office of Management and Budget has advised that, from the standpoint
of the Administration's program, there is no objection to the submission of this
report to the Congress.
Sincerely,
Joseph P. Allen,
Assistant Adiii inistrator
for Legislative Affairs.
[Wliereupon, at 12 :20 p.m. the hearing adjourned to reconvene at
10 a.m. on May 11, 1971.]
COPYRIGHT LAW REVISION
WEDNESDAY, MAY 14, 1975
House of Kepresextatives,
Subcommittee ox Courts, Civil Liberties,
AND the Administration of Justice of the
Committee on the Judiciary,
Washington, D.C.
The subcommittee met. pursuant to notice, at 10:10 a.m. in room
2226, Kaj^burn House Office Building, Hon. Robert W. Kastenmeier
[chairman of the subcommittee] presidin<j.
Present: Representatives Kastenmeier, Danielson, Pattison. and
Mazzoli.
Also present: Herbert Fuchs, counsel, and Thomas E. Mooney,
associate counsel.
]Mr. Kastenmeier. The hearing will come to order on the third morn-
ing of hearings on copyright law revision. The issue under discussion
lends itself into equal division of time between those in favor and those
opposed: each side will be invited to divide 80 minutes of testimony
among its members, and you will be expected to stay within that time
frame.
This morning six national library associations have given their
entire half-hour to Mr. Edmon Low. Thereafter four representatives
of writers and publishers will share their 30 minutes in arguing the
other side of the library photocopying issue.
Furthermore, the Chair will announce that the chairman and per-
haps another member of the committee will have to excuse themselves
for the purpose of appearing before the Rules Committee on the ques-
tion of the Parole Reorganization Act this morning, and the gentleman
from California, Mr. Danielson, will preside during that period of
absence of the Chair.
Before introducing the first witness, T would like to yield to our Judi-
ciary Committee colleague from Kentucky, Mr. Mazzoli, for the intro-
duction of one of the witnesses,
]Mr. Mazzoli. ]\Ir. Chairman, thank you very much, I appreciate
your willingness to yield today. I would like to just take this chance to
introduce to you and your distinguished subcommittee a lady who is
from mv district and with whom I snend many hours on airplanes, fly-
ing back and forth from the District of Columbia to Louisville, our
home.
Mrs. Joan Titley Adams, Mr. Chairman, is testifying in your first
panel today, and without taking any more of your valuable time, I
would just like to commend her testimony because she is a professor
at the University of Louisville, as well as being the librarian of the
( 183)
184
Sciences Library. She has been in the Medical Li})rary Association in
virtually all of its positions, including the board of directors. She like-
wise holds positions in the University of Louisville on its faculty sen-
ate. And without necessarily knowino- all the nuances of the bill before
you, which is very complicated, I would like to commend her testimony.
Thank you very m.uch, Mr. Chairman.
Mr. Kastenmeier. Thank you for this introduction. I say to my col-
league I am sorry we can't introduce all our witnesses as fully in terms
of their biographies.
The Chair would like to welcome Mrs. Adams and Mr. Low. I under-
stand Mr. Low this morning will make the major presentation on behalf
of tlie liJH-aries. Mr. Low, you may want to introduce your other col-
leagues. You may proceed as you wish.
TESTIMONY OF EDMON LOW, REPEESENTATIVE OF SIX IIBRAHY
ASSOCIATIONS
Mr. Low. Thank you, Mr. Chairman. I am Edmon Low, and I will
today present the views of the American library community as repre-
sented through six major library associations. With me are representa-
tives of each of the six associations. I am happy to present to you Mr.
Julius Marke, representing the law libraries and chairman of their
copyright committee. Mr. McDonald, at my right, is the executive
director of the Association of Research Libraries. At my left, Mrs.
Adams — and Mr. Mazzoli, we share your enthusiasm for Mrs. Adams
and her work in our library community. Next is Mrs. Sommer, who is
representing the Music Library Association, and who is the chairman
of their copyright committee; and Mr. Frank McKenna, who is the
executive director of the Special Libraries Association. And then with
us we have the members of counsel, sitting behind us here, My. Sharaf,
who represents the Harvard L^niversity Library ; Mr. William North,
representing the American Library Association, and Mr. Philip
Brown, representing the Association of Research Libraries.
Mr. Kastenmeier. Thank you.
Mr. Low. Because of our time limitation, with your permission,
Mr. Chairman, I shall omit some of my testimony and ask that this
statement be admitted into the record.
Mr. Kastenmeier. Without objection, your statement in its entirety
will he received in the record. You may proceed, sir.
Mr. Low. Thank you.
We are here today to talk about library copying and the provisions
of the copyright revision bill. PI.R. 2228. I shall be presenting, so far
as I am able, the concerns of all these various library groups. However,
each of these organizations will also be filing a statement of its own,
setting forth in greater detail its individual concerns about provisions
of the bill. All of the representatives will assist me in answering
particular questions you may have concerning our testimony and the
issues raised.
Although our testimony today is limited to library photocopying
which is the subject of this hearing, there are other provisions of the
bill which concern us, and about which we may be making further
statements as other hearings are scheduled.
185
I would like first to point out tliat, although this copyright revision
bill has been under consideration for 10 years, the library photocopy-
ing issue is still an important unresolved subject. In brief, as we see
it, a question which Congress and this conunittee must decide is
wiiether libraries will be permitted — at no additional expense — to
continue to serve the public by the long-standing practice of providing
single copies of copyrighted material for users' research or study. It
IS an issue with direct and widespread impact on the general public
and involves both the right of access to library materials and the cost
of that access.
In the past year there have been two major developments affecting
this question. In the fii-st case ever brought by a publisher, the
Williams & Wilkins Co., against a library the courts have upheld the
photocopying of single copies of copyrighted medical journal articles
as being within the doctrine of fair use, and not constituting infringe-
ment of copyright. It is in part because this case consumed 7 years
and major financial outlay that libraries are concerned about the
second major development, which is the introduction last year into the
Senate bill, without any hearing, of a new and undefined limitation on
the rights of libraries ; namely, the concept of "systematic reproduc-
tion" of either single or multiple copies of copyrighted material.
Now when we talk about library copying, we are not talking about
something for the benefit of libraries or librarians, we are talking
about something that is carried on for the benefit of users of libraries
who include citizens from all walks of life throughout the coimtry.
When we are talking about library copying practices, we are talk-
ing about the schoolboy in California who may need a copy of an
article in the Los Angeles Times for a project he is working on in his
ninth-grade class ; or about a judge in the county court in Middlesex
County, Mass., who may find he needs a copy of a law review article
which bears directlj'^ upon a difficult question of law which has arisen
in the course of liis work. Or about the doctor in downstate Illinois
who has a patient with an unusual and rare disease and the only recent
material to be found is contained in an obscure journal published in
Sweden, and available only through the Regional Medical Library
system, but which article may aid him in saving his patient's life.
And we are talking about, even, a member of this committee asking
the Congressional Eeference Service of the Library of Congress for an
article dealing with copyright. Or, we are talking about a musician
who is preparing a scholarly article on the music of Mozart and needs
to take with him to study a copy of a portion of a recently edited
score of one of Mozart's works with which he is concerned.
The list is endless, but I wish to emphasize that we are talking about
an issue that very broadly affects the ability of people in this country
to make use of their libraries which are the repository and storehouse
of man's knowledge.
I should note here that copyright is not a constitutional right, such
as trial by jury of one's peers. The Constitution simply authorizes
the Congress to create such a right. It is therefore a statutory right,
one created by law, Avhich may be changed, enlarged, narrowed or
abolished altogether by the Congress here assembled. It is a law en-
acted not for the benefit of an individual or a corporation, but for
57-7SG— 7G— pt. 1 13
186
the public good and with the purpose, as the Constitution expresses
it, "to promote the progress of science and useful arts."
Consequently, in revising the copyright law the problem for Con-
gress is to design provisions which both encourage the creation of
original works and permit the widest possible access and dissemina-
tion of information to the public ; and, where these goals compete, to
strike a balance which best serves the fundamental objective of pro-
moting learning, scholarsliip, and the arts.
I should like to go on to the top of page 5. At present I am director
of the New College Library at Sarasota, Fla. New College is a small,
but very fine, private college and its problems in this connection are
typical of the two thousand small and medium-sized colleges through-
out the country. While our library is liberally supported and spends
every cent it can afford on periodical subscriptions, we cannot possibly
have the large resources of a university like the one at Gainesville
or at Tallahassee. Yet, our faculty memljers, if they maintain a good
quality of teaching and do the research which contributes to it, must
have access by random photocopying at times to the larger collections
in the State and elsewhere.
It is the general experience of the library communit}'' that inter-
library loan encourages the entering of additional subscriptions by
the library, rather than reducing the number, as is often charged by
the publishers. It is a truism that a librarian would prefer to have
a title at hand, rather than to have to borrow, even under the most
convenient circumstances. Consequently, when the time comes around
each year to consider the list of periodical subscriptions, the record
of interlibrary loans is scanned and titles are included from which
articles have been requested with some frequency during the year.
While the situation varies, in our library the number is two; if we
have had two or more requests for articles from the same title during
the year, we enter a subscription. This not only indicates how the pro-
cedure can help the periodical publishers, but also indicates that if
only one article, or none was copied from a title during a year, the
journal could not have been damaged materially in the process.
It is not only the small schools which would suffer if such photo-
copying were eliminated, however ; the scholars at Wisconsin or Michi-
gan would also be severely put to it to continue their research in the
same way, and it is these scholars who account for the major writing
for the scholarly journals. The journals tliemselves, therefore, have
a stake in seeing this procedure continued in a reasonable way.
The courts have long recognized that some reproduction of portions
of a copyrighted work for purposes of criticism, teaching, scholar-
ship or research is desirable, and this judicial concept was incor-
porated in section 107 of the revision bill. Libraries have operated
all these years under this principle, but it does lack the assurance of
freedom of liability from harassing suits. This fair use concept is
necessarily expressed in general language in section 107 of the bill.
So a librarian is not able to feel sure until a court decides a particular
case whether his actions, undertaken with the best of intentions, is
or is not an infringement.
This is pointedly illustrated by the recently decided and prior men-
tioned case of WilUams & Wilkhis. This suit was instituted in 1968 and
now, only now, after years of litigation and expenditures of many
187
thousands of dollars on eacli side, has it been determined that the
defendant was properly obeying the law after all.
Fair use, then, is not really a right to copy any given thing, but
only a defense to be invoked if one is sued. This threat of suit, even if
one is able to maintain his innocence in court, is very real because
suits are costly in proportion to the amount for which one is sued. This
revision bill provides not only for a demand for actual damages, but
also one can be sued, in extreme cases, for statutory damages up to a
limit of $50,000 for each imagined infringement. Thus, harassing but
unjustifiable suits are really invited by this provision.
In light of the above we librarians believe that in addition to sec-
tion 107, delineating fair use, further protection is needed to assure
that it is permissible to make a single copy as an aid in teaching and
research, including a single copy as part of an interlibrary loan trans-
action, and that such activity on behalf of the public good is not sub-
ject to possible suit.
Now, I want to emphasize here that in 108, the provisions that we
want to see maintained are not additions to 107 in the sense of pro-
viding further opportunity for copying, but simply a more precise
explanation of what, in relation to libraries, "fair use" means. That is,
you can be sued, regardless of whether you are guilty or not, under 107.
We would like to see the photocopying practices involving single
journal articles be permitted without threats of suits.
That assurance is now being largely provided in section 108, (a)
through (f), for which we are very appreciative. However, we are
greatly concerned with the addition of subsections 108(g) (1) and (2)
which take back the very right set forth in 108 (a) through (f) in
the most part. These are provisions which came into the bill in the
Senate after hearings were concluded in 1973, without the oppor-
tunity for discussions by library representatives with Senator Mc-
Clellan's committee. Today's hearings are the first opportunity we
have to express publicly our very deep concern.
Before discussing subsections (g) and (h), I would like to note
there is also a particular problem in the interpretation of section 108
(a) which can affect the specialized libraries in business, industry,
and commerce. This is discussed in Mr. McKenna's individual state-
ment for the Special Library Association, and he can also answer
questions in this regard.
Subsection (g) (1) gives us concern because often there is no basis —
this is one that says if an assignment was made and then people came
in, you would have to recognize whether it was isolated, or essentially
multiple copies. This gives us concern because there is no way for a
library employee to judge whether a request for a copy represents an
isolated, unrelated reproduction, as specified in 108(g)(1). For ex-
ample, if a college instructor in a graduate seminar in English were
to recommend to his students, some 10 men and women sitting around
a table, that they read an article on Milton's poetry that appeared 10
years ago in publications of the Modem LangTiage Association, and if
two of them over the next week were to go to that college's library and
look at that article and decide that they wanted to take copies back to
their dormitory for further study, we don't see how there is any prac-
tical way in which a library can prevent that kind of reproduction of
a single copy on separate occasions, and we don't think they should
188
have to. Also, we do not think that the publication will be damaged
in such a process. And yet, the Senate committee in its report on S.
1361 cites such a particular instance.
Section 108(g)(2) says that the rights of reproduction and dis-
tribution do not extend to a library which "engages in the systematic
reproduction or distribution of single or multiple copies or phono-
records of material described in subsection (d)." The materials re-
ferred to in (d) are journal articles or small portions of other copy-
righted works.
This gives us a great deal of concern because the question immedi-
ately arises as to what constitutes "systematic reproduction." To the
extent that we are able to puzzle it out, it appears to have been aimed
at practices of the kind which were upheld as fair use by the Court
of Claims in the Williams (& Wilkins case. In listening to my pub-
lisher and author friends, the preemment example which they give
of systematic reproduction has always been the regional medical li-
brary system, with the National Library of Medicine at its apex.
Those practices of the National Library of Medicine were, of course,
upheld by the Court of Claims in Williams <& Wilhins in a decision
which was affirmed this year by the U.S. Supreme Court.
Now, the rest of this page goes on describing how the regional
medical library system works, and in the interest of time I will omit
reading that. But Mrs. Adams works with this all the time and is sure
to answer any questions you may have concerning this, and also talks
about it in the particular statement she filed.
Going to the top of page 9. Another large and highly important
type of system for which this systematic reproduction poses problems
is that of the county and multicounty library systems throughout
the whole country. These libraries came into being largely through
the opportunity provided by the Federal Library Services and Con-
struction Act. This was, and still is, an effort to bring books and other
library materials to the millions of people, often in rural areas, w^ho
had not heretofore had library services available.
To get counties to join together, vote the necessary taxes, agree on
a coinmon governing board, and gain consensus on the sites for a
central library and for the smaller satellite libraries in the system
is a difficult task. It is often made possible only by the promise to the
citizens of much broader areas of information which w^ll be made
available to them not only from their small but growing collection
in each neighborhood, but also through loans from the central library
and through it from larger collections elsewhere. In this, some copying
of periodical articles is occasionally involved, but it does not result
in fewer subscriptions — in fact, before the founding of many of these
libraries, there were no periodical subscriptions at all in the area.
Because interlibrary loan is one of the vital elements in this concept
which has been so mutually beneficial to all, it is urged that no restric-
tions be imposed which would diminish the effectiveness of the pro-
gram. Such a diminution, if it occurred, would be as much against
the interest of the publishers as against the citizens the libraries serve.
I should like to give you an illustration from my home State of
Oklahoma, which I know well. I am in Florida now, but Oklahoma is
my native State. A few years ago, the Western Plains library system
was established consisting of four counties in western Oklahoma. At
189
the time of its organization, tliere was a single library in each of two
counties. The other two had no libraries. Now there are seven libraries
in the four counties and tAvo bookmobiles are operating regularly. At
the beginning, the 2 original libraries subscribed to 20 periodicals
between them. The 7 libraries now subscribe to over 300. The combined
annual book budget of the two original libraries was under $2,500;
the annual book budget for the seven is now $42,000.
In addition, they have encouraged school libraries to develop collec-
tions of periodicals and books and are now promoting with success
the creation of home collections of books and periodicals. This tre-
mendous increase in acquisition of materials has obviously benefited
the publishers of materials as well as the citizens the libraries serve.
This kind of multicounty library is now found in every State in
the Union, and over the 2 decades the Library Services and Construc-
tion Act has been in existence millions of dollars of Federal money
and matching local funds have been expended for this kind of service.
The importance of this activity was recognized in the Senate report
last summer, accompanying S. 1361, in the portion discussing sys-
tematic reproduction by saying, "The photocopying needs of such
operations as multicounty regional systems must be met," but no pro-
vision was made in the law to specifically provide for these needs.
Section 108(g) (2) would prohibit their copying activity, and I believe
would do much mischief indeed.
If I may drop to tlie last paragraph on the page. We are also con-
cerned with section 108 (li) which would limit the rights otherwise
granted under section 108 b}^ excluding a musical work, pictorial,
graphic, and other audiovisual works. These exclusions are illogical.
The need of the scholar doing research in music for a copy of a portion
of a score is as legitimate and proper as that of the scholar doing any
other kind of research. Likewise, the copying of one map from an
atlas or a page of diagrams and plans from a technical journal may
be just as important as any other kind of material for research. I will
skip the next paragraph.
Mrs. Susan Sommer of the Music Library Association is with us
today and can provide further information about the problems posed
by this section of the bill in relation to music. Dr. Frank McKenna,
of the Special Libraries Association, is also here and can discuss the
problems in relation to atlas or other graphic materials in books and
periodicals.
If I may go to the top of page 12. The paragraphs following what
I was reading describe the formation of a study group between the
libraries and the publishers to see if there were agreements we could
reach in this area of photocopying ; and we have had several meetings
in this regard.
There are, of course, different views of the significance of the work
performed to date by the conference and its working group. The work
has focused upon the mechanics and the feasibility of possible mecha-
nisms for collecting payments for photocopying of copyrighted ma-
terials. But I should like to emphasize here that there has been no
agreement as to whether such a payment mechanism is accei^table
to libraries even if it is workable, and also, I m.ay say, no seemingly
Avorkable mechanism has yet been advanced in that it still appears it
would take dollars to collect dimes. There has also been no agreement
190
as to the categories of publications to which sucli a meclianism should
be applied and no change in the position of libraries that their cur-
rent photocopying practices are entirely lawful and within the fair
use holding of the Williams & Wilkins case, and should not in any
respect be treated as infringing rights of the copyright proprietor in
the provisions of any new legislation.
I should like to point out some reasons why we think licensing and
payment of royalties by libraries for the photocopying they do is not
justified. First, many publishers already have variable pricing for
journals; that is, they charge a considerably higher price for the same
journal for a library subscription than for an individual subscription.
These prices to libraries often run quite high, subscriptions of $100 to
$300 a year are not uncormnon; a few run $1,000 or more; and the
$50 to $100 price is quite commonplace in the scientific field. These
higher subscription prices to libraries presumably are designed in
many cases to include charges for anticipated copying. Some journal
publishers have also received substantial Federal assistance in mod-
ernizing their editorial and manufacturing procedures. Other jour-
nals, and also some of those just mentioned, have already had major
contributions of public funds in the nature of per-page charges, usualh'-
in the range of $50 to $100 per printed page paid by the author or by a
Federal grant which is financing his work.
The author, on the other hand, is usually not paid by the publisher
for his work in writing the article, but the library or the institution
where tlie author is located often spends a sizable amount for inter-
library loan postage and handling to aid him in preparation of his
article which the periodical then receives without cost. As an example,
my own small library spent during this past year over $100 on inter-
library loan expense for books to enable a professor to write an article
for a historical journal, but the journal did not pay him an}' thing
for the article.
In the light of these contributions which the libraries and the
public already make to the publication of these works, it seems to us
unreasonable for journal publishers to demand still further payment
from libraries, and eventually the public, for the occasional photo-
copying of individual articles for library users. It seems even more
unreasonable in view of the fact that by making the information con-
cerned available to those with current, specific needs for it, library
photocopying fosters the basic purpose of the authors of such articles.
But when it also is noted that there is no evidence that the libraries'
policies have caused publishers any harm whatsoever, and ma;/ actually
increase their subscriptions, it is clear that such demands are completely
unjustified and the public interest requires that they be rejected by
Congress.
For the reasons we have advanced, we urge that sections 108(g)
(1), and (2), and (h) be deleted from the bill, since these sections are
taking away the advantao:es for the most part granted in 108 (a)
through (f ). This would also be in accord with the WUlimns & WiU^ins
case decision and would permit libraries to continue the long estab-
lished library service of providing a single photocopy of a single article
or excerpt from a copyrighted periodical or book for a patron's use
without incurring liability for copyright royalties.
It has been a pleasure to appear before you today, Mr. Chairman,
and I assure you that we are ready to be of assistance in any way we
191
can toward a satisfactory resolution of this very difficult but im-
portant problem to us.
Mr. Kastexmeier. Thank you, Mr. Low, for a very informative
statement, a very useful statement.
Off the record.
[Discussion off the record.]
Mr. Kastenmeier. Mr. Low, you indicated this morning that you
and your colleagues would address the question of photocopying, but
that there were a number of other provisions in the bill with which
librarians were concerned, and you would hope to testify later on those
areas; is that correct?
Mr. Low. Yes.
Mr. Kastenmeier. Will it be your panel, or will it be a different set
of witnesses wo might have with respect to other questions?
]Mr. Lev/. I think it would be this panel, but since their judgment
may have been in question for selecting me, I can't be sure that I
v.dll be speaking again.
Mr. Kastexmeier. At what point in time did the photocopying
that takes place in libraries, really originate, 10 years ago, 15 years
ago ; can you place that point in time for us ?
Mr. Low. The electrostatic photocopying — Xeroxing, as it is often
called — really came to the fore about 1960, and became widely used
in the ensuing years thereafter. However, it has not become a matter
of enough concern, apparently — I wasn't working with the committee
at that time — when testimony was taken before your committee in
1965 and 1966, along there, to have been a major problem.
It has come to the fore in recent years, particularly because there
has been a considerable amount of photocopying because of the in-
crease in the amount of recorded knowledge, and the impossibility
of any library being able to have a major portion of it ; and also because
of the information of library systems, so-called, many of which were
not desigTied for or concerned with photocopying, but were con-
cerned with promoting better library arrangements in the area of cen-
tralized cataloging, and so on.
But the creation of systems seems to have concerned particularly
our publisher friends — and we would consider the publishers our
friends because we have many things in common, much m.ore than our
differences, in spite of those differences that appear before you today.
So, we believe that these systems as yet do not pose any threats of
damage to the publishers because they were not primarily created for
the purpose of promoting photocopying in the sense of trying to get
one periodical here, and let it serve for a large group in the surround-
ing area, and discourage subscriptions by the surrounding libraries.
Mr. IC^STEisTMEiER. I take it the provisions of the bill passed by the
House in 1967, they also would not have been adequate, or at least ac-
ceptable, for libraries in terms of photocopying; is that correct?
Mr. Low. Yes. In regard to prior use, you made the statement that
you are not attempting to encourage or narrow, but simply put in legal
form, the judicial concept of fair use.
Now, particularly with the suit of Williams & WilJdns — and I don't
want to belabor that too much — where they think that some copying
is damaging their livelihood, they can bring a suit — ^that's the weak-
ness of 107 that we have been greatly concerned with since that time.
This cannot be controlled if you have a periodical publisher that felt
192
that, well, his subscriptions were diminishino; and the reason why is
very hard to determine; photocopying is often singled out and he
becomes convinced that, if it weren't for photocopying, he would be
in much better shape, so, the only thing to do is to use tlie library.
And that may not be the reason for diminishing subscriptions at all.
It may be a reduction in funds, and the library cannot afford to sub-
scribe to all the journals as in the past; and that becomes an increas-
ing problem as money for higher education is becoming more limited
these days than it was in the late 1960-s and the last few years, and
periodical subscriptions have to be discontinued.
Mr. Kastenmeier. Is it your position that photocopying does not
affect in the final analysis, in neutral terms, the number of copies that
could be sold by the publisher of a given periodical or magazine?
Mr. Low. We believe that, and in my experience over quite a long
time, I found no evidence otherwise. I would like to have Mr. INIc-
Donald, who is the director of the Association of Kesearch Libraries,
and represents the large research libraries who do more copying than
the smaller libraries, but often in response to requests that come in
from them, to comment on that, too.
Mr. McDoxALD. I would be happy to. What evidence there is sug-
gests that subscriptions are not diminished. That the practice of inter-
library loans in fact tends to advertise journals and to increase sales.
Wo know less about this than we would like to know, but we look to
Britain for a model. As you may know, the British Government has
established a national library service. The British Library Lending
Division has evidence that its loans of periodicals and photocopies of
journals promote subscriptions. Very often from the field the}- get a
request for any issue of a given journal. The obvious intent of that
request is to inspect that issue with the thought of entering a sub-
scription. They have done a little checking on this and have deter-
mined that this advertising effect has, in fact, resulted in subscriptions.
I would go on to say that our friends on the publishing side have
never really entered any evidence of economic damage. Certainly in
the Williams <& Wilkins case, no such evidence was presented.
Many libraries feel that interlibrary loan practice is a stimulus to
publication and research, and that rather than resulting in damage,
quite the opposite is true.
]\Ir. Kastenmeier. Of course, I think it could be predicted that
many publishers w-ould be sensitive because there are many publica-
tions which are, in terms of interest and specialty, very narrow in-
deed— medical publications, for example — and therefore there is a lim-
ited opportunity to develop subscriptions. And if that is in any way
diminished, it w-ould probably be terribly harmful to that publication.
But, it is difficult to judge, as you say, what the cause may be.
Now, in terms of your working group, I take it you are considering
this is an ongoing enterprise, and you are considering a number of
alternatives; one would be what the language should be in terms of
limitation of the construction of "fair use," or whether copying should
be permitted with some sort of royalty which you suggested, talking
about dollars and dimes. "Wliich would you prefer? Would you prefer a
wider, a broader availability in terms of photocopjdng with smaller
fees attached, or a somewhat more restricted statutory permission
to copy ?
193
Mr. Low. As I indicated, we feel at the present time that no fee
should be charged. Wien we started out in the working group, the
first thing we attacked was the systematic copying; that is, what con-
stituted systematic copying. And we were totally una,ble to reach
agreement on that. Some of our publishers insisted that the existence of
a union list of serials and State and regional list of periodicals that
shows where the periodicals can be located, the existence of these lists
constituted a system in itself, and consequently all interlibrary loans
became systematic and prohibited.
Others felt that at least the large research libraries which did
much copying, simply by the amount of copying they did it must be
systematic automatically'^ because of the amount they did.
I tried to point out that often this amount done by the large re-
search libraries was smaller libraries like mine turning to them for
copies of articles, and so on, which seemed that it would be acceptable
in a way. So, we were not able to reach any consensus on systematic
copying.
The work we have done on the mechanism was simply to see whether
there was any mechanism that was feasible, in case it was desirable.
IVe didn't agree that any mechanism that involved royalty payments
was desirable at this time. But we have been investigating as to whether
or not it was feasible; if Jiot, there wasn't much point in considering
further whether it was desirable or not.
We have not yet come up with a feasible mechanism that seems at
least to me Avorkable.
jNIr. Kastenmeier. One last question. In terms of the bill before
this committee, H.E. 2223, the recommendation that you make in the
language on behalf of the library users with respect to photocopying is
that sections 108(g) (1), (2), and subsection (h) be deleted from
the bill. This is the only recommendation you would make with refer-
ence to 108 ?
Mr. Low. Yes; well, we have a little concern with 108(a) (2), which
affects the Special Libraries Association in which Mr. McKenna
Mr. McKenxa. May I correct that? That is section 108(a) (1).
Mr. Low. Yes.
]\Ir. McKenna. The present language is, "The reproduction or dis-
tribution is made without any purpose of direct or indirect commercial
advantage."
Now, the question arises, what is the interpretation to be placed on
"direct or indirect commercial advantage"? The majority of the spe-
cialized libraries exist in business and commerce, and their parent orga-
nizations have a direct or indirect commercial interest and commercial
advantage, profit, or lower prices, hopefully.
It has occurred to us that the existing language of section 108 (a) (1)
may have been intended to proliibit a commercial advantage to an
unauthorized reprinter, or republisher, without thinking, or realizing
that special libraries existed in American business.
So that in the statement of the Special Libraries Association we
have recommended two possible alternatives. One is to add to the
existing words so that it will read, "Without any purpose of direct
or indirect commercial advantage to a reprinter, or republisher."
194
The alternate suggestion is that, through appropriate commen-
tary in the legislative history, it indicates that the provision is not in-
tended for special libraries.
Mr. Kastenmeier. I will now yield to the gentleman from Cali-
fornia, Mr. Danielson.
Mr. Danielson. Will you tell me, please, what procedures the li-
braries used for copying prior to the advent of the quick copying
machines ?
Mr. Low. The photographic method had been used for a long time,
dating back even prior to the first Copyright Act. It was a diifferent
photographic process, photographing the page instead of Xeroxing.
Mr. Danielson. You are talking about a large, somewhat cumber-
some photostat machine, and it made usually a white copy on black
paper.
Mr. Low. That is correct.
Mr. Danielson. And that was fairly expensive to operate, was it
not?
Mr. Low. Yes ; it was.
Mr. Danielson. And per page the product was maybe something
like 50 cents, something like that ?
Mr. Low\ Yes. And also, as a result of that and the inconvenience,
we shipped much more material, sent the whole volume.
Mr. Danielson. Just sent them the book, let them look at it, and
send it back.
Mr. Low. That's right.
Mr. Danielson. Now, under those circumstances, did you have many
complaints — I'm going to use the word in the very broad sense — from
the publishers of the journals and books ?
Mr. Low. Not that I know of. Of course, sending the material was
completely legal.
Mr. Danielson. I have a very narrow area of inquiry. You did not
have complaints at that time.
Mr. Low. No ; we did not ; I believe that's correct.
Mr. Danielson. In other words, it was the advent of the quick copy-
ing, and low-cost copying that brought on that problem.
Mr. Low. That's correct.
Mr. Danielson. You mentioned in your statement that with some
technical journals, at least, there is a different subscription rate for the
library than for, I guess you would call it, the individual subscriber.
Mr. Low. Yes.
Mr. Danielson. Would you give me some examples of that, please?
Mr. Low. I have a list of examples, but when I looked in my
folder
Mr. Danielson. Just a few off the top of your head.
Mr. Low. Well, the American Behavioral Sciences is one, I remem-
ber making the list.
]Mr. Danielson. Sir, I'm not that interested in the title, but do you
mean it's $1 for the private citizen, and $100 for the library? Give
me some examples of the difference, please.
Mr. Low. Not that spread. I went through my own libraiy, went
through the A's, and found about 40 just in the A's alone, and that is
a small collection. It is a going practice.
Mr. Danielson. Would you give me an example, please ?
195
Mr, Low. Of the price ?
Mr. Danielson. Yes, please.
Mr. Low. The price will run from $12 for the individual and $30
for the library. It's often double the individual price, to the library ;
sometimes the spread is much wider than that.
Mr. Danielson. Is that a published practice ? By that I mean, does
it appear within the publication that the subscription for a library is
three x dollars, and for the individual one and a half a?, maybe.
Mr. Low. That is correct.
Mr. Danielson. You are confident that is a prevailing practice. I see
five heads nodding affirmatively, and one is rather umnoving, here.
[Laughter.]
Mr. Low. Yes, that is an established practice.
Mr. Danielson. All right, that's good enough.
Last, on these technical journals, what is the practice in the trade
as to this one respect, are they sold by subscription exclusively, or are
they sold by subscription and also sold through retail outlets, as we
pick up a magazine at a newsstand, for example ?
;Mr. Low. Most of these are not sold, you do not find them in the
newsstand ; I believe I'm correct on that.
Mr. Danielson. Well, I used the words "retail outlets" to differen-
tiate from newsstand, because I imagine there is some place besides
newsstands where you can buy them.
Mr. Low. I don't believe you can buy them — of course you have
subscription agents where you can place your subscription, most li-
braries do in order to get the list all on one bill. But not the retail
outlets, in any way, shape, or form.
Mr. Danielson. You don't run out and get one like you get last
month's copy of — whatever.
Mr. Low. No ; you do not.
Mr. Danielson. You subscribe for a year, or a period of time.
Mr. Low. Yes.
Mr. Danielson. The gentleman on the end has a comment, please.
Mr. Marke. ;My name is ;Marke. I think it should be recognized that
many of these publications are out of print within a period of 2
months, or 3 months after the issue has been made available to the
public. So, it is not even possible to buy it through any source.
Mr. Danielson. Well, that's my third question. Once they are out
of print, the subscriptions have all been sent out through the mail,
suppose you want to pick up a copy of, let us say. May 1970 — that's
5 years ago — issue of Journal XYZ, a technical journal, where do you
get it?
Mr. Marke. It's a rare occasion when this is available through the
publisher.
Mr. Danielson. In other words, you write to the publisher, you in-
quire of the publisher, does he have a spare copy ; is that the way it
is done ?
Mr. Marke. Yes.
Mr. Danielson. The second gentleman has an answer for us. Wliat
is your name, please ?
Mr. McDonald. McDonald. Mr. Danielson, people subscribe to the
periodicals, but they have neither the space nor the money to keep and
196
bind these periodicals, except the large libraries, such as represented
by the Association of Research Libraries, which are the libraries of
record. They do assume the responsibility of keeping and binding back
jfiles of periodicals.
So, when a request comes to us, it may well come from an individual
xyr library wliich once subscribed to that periodical, paid the subscrip-
tion price, but did not choose to keep and bind it.
Mr. Danielson. Well, suppose I'm doing some research and I find
through the Library of Congress there is an article in a 4- or 5-year-
old issue of a technical journal — forget that I have access to the Li-
brary of Congress — where would I get it ?
Mr. IMarke. Well, on occasion some libraries might have accumu-
lated some extra copies in what is called the "dup. list," and librarians
very carefully go through these dup. lists — duplicate lists — to see
whether any of these issues are available through that list. But other-
wise there is no formal structure.
]Mr. Danielson. I, an individual citizen, how would I find it? I
didn't know there was a dup. list, how would I find it ?
Mr. Marke. You couldn't.
Mr. Danielson. That's the question.
I have no further questions, I yield to the gentleman from New York,
Mr. Pattison.
Mr. Pattison. Thank you, Mr. Chairman.
I might just as an aside say of the use of the word "Xeroxing," that
if the general counsel of Xerox reads that in the testimony, he will
lose whatever little hair he has left.
]Mr. Danielson. That's a real hazard. [Laughter.]
Mr. Pattison. To you, maybe. [Laughter.]
Mr. Pattison. I would like to point out a few things. You refer to the
Williams c& WiJkhu case as being "affirmed" by the Supreme Court.
In fact, the Supreme Court's was a 4-to-4 decision, I believe. I don't
believe it can be said it was "affirmed." I think then it was a 4-to-3
decision in the Circuit Court of Claims. I think that kind of indicates
the problem that we will be having, that you have. Yes, sir?
Mr. McDonald. With all respect, Mr. Pattison, I believe that the
language of the decision passed down by the court says, "By reason of
a divided court the decision of i^ao, lower court is affirmed" ; those are
the words that the Supreme Court used.
]Mr. Pattison. OK. I was trying to point out that was not one of
those decisions where reasonable men would not disagree. [Laughter.]
Like yourself, some of my best friends are publishers also. [Laughter.]
Mr. McDonald. We are trying to be very scrupulous about this and
resisted the temptation to say that the decision was "upheld" because
the Supreme Court avoided using that word itself.
]\Tr. Pattison. The thing that I see here, this whole dispute, is not
so different from that, for instance, with the CATV dispute. Every-
l)ody seems to say, we are helping the other guy more than he has been
hurt. The CATV peo]:)le said the same thing about broadcasting.
Broadcasting was delighted to have CATV out there when there was
nobody competing with them; it increased their market. Then, all of
a sudden when you get the overlapping signals, and duplication, you've
got a different thing. That kind of competing interest, I think, is well
pointed out in your statement that, indeed, there must be some sort of
197
a reasonable compromise that will probably be acceptable to no one. but
will probably be arrived at somewhere along the line, or we won't get a
bill passed at all.
I just have one minor question about your statement on page 12. You
referred to something that I'm not familiar with, and I'm just curious
about it, where it says, "Some journal publishers have received sub-
stantial Federal assistance in modernizing their editorial and manu-
facturing procedures," and I don't know what you are referring to
there ; I'm just curious as to what that is.
]\Ir. Low. John, would you care to comment on that ?
Mr. ]McDoNALD. I'll try, but I believe Mr. McKenna knows more
about it than I. Many of the scholarly societies, the American Chemical
Society, have had assistance from Federal agencies, such as the Xa-
tional Science Foundation, in one or another of their pursuits. The
nature and extent of these subsidies is not something I am an expert
on by any means, but there are further subsidies that might be cited.
Often the authors who publish in these journals have conducted
their research with Federal support. As ]Mr. Low's testimony points
out. the publishers are paid page charges to get this information dis-
tributed through these periodicals. The subscription prices themselves
liave risen, I believe, in excess of the cost of living. So, it seems that
these subscriptions have been bought and paid for quite adequately,
and the notion of some further charge, or surcharge in the form of a
royalty or licensing payment, I think, would be excessive.
Mr. Low. I believe Mr. McKenna has some additional examples.
Mr. McKenna. Mr. McDonald mentioned professional societies. I am
aware of subsidies that have been paid by the National Science Founda-
tion to a commercial publisher to acquire cold typesetting equipment,
so that he has been able to establish a relatively large printing plant, on
the basis that his publications were of national interest, covered
translations of Soviet periodicals.
Mr. Pattison. I see. The other item that I think will be examined
by us further is that by other testimony I know that in the Willia7ns
& WilMns case, that firm has developed statistics, demonstrating —
to the extent it can be demonstrated, it is obviously so full of other
factors that it is difficult to demonstrate — demonstrating a loss of
subscriptions.
That is a point of dispute, whether they lose, or don't lose. But if
in fact the publishers were convinced that they didn't lose, and if
in fact they were convinced that they increased their subscriptions,
we wouldn't be having this discussion right now. So, I think that
probably is a point of dispute and something I would like to hear
some more about.
Mrs. Adams. May I speak to that, sir ?
Mr. Pattison. Certainly.
Mrs. Adams. I am a medical librarian. We were very much in-
volved in this suit. If you notice the rate of increased numbers of
subcriptions from the early 1960's up to, say, 1969 or 1970, this is
during the period, as was mentioned, when the rapid, efficient repro-
duction of materials became available, you will see that there was a
constant rise in the number of subscriptions that were taken by pub-
lishers, including Williams & Wilkins.
198
So, from the period, say, of the late 1960's to now, there has been
a definite decline. My own library has had to cut back on subscrip-
tions, and that has nothmg to do with the photocopies, it is simply
a reality of frozen budgets within universities, and having to examine
highly specialized journals ; it has nothing to do with photocopying.
Our i3liotocopying has increased because of our involvement with
the regional medical library program. That supplies copies of highly
specialized articles to physicians and health professionals in rural
areas, some 50 to 150 miles from us, and we supplied over 600 items
in just 1 year. There is no way that they could, in their small hos-
pital libraries, have such collections.
But the answer goes back to, there is a correlation between decreas-
ing amounts of money available to education and research, and the
decrease in number of subscriptions. We don't find that relates to
photocopies.
Mr. Danielson. Which of course demonstrates the difficulty of the
problem. If you convince the publishers of that, we will have no
I)roblem.
Mrs. Adams. We have been trying.
Mr. Marke. You may recall that the Court of Claims actually stated
in its opinion that there was inadequate reason to believe that it — ^the
publisher — was being harmed specifically
Mr. Pattison. I'm aware of that holding. The figures that have been
developed by Williams & Wilkins are quite extensive, since that time.
Mr. Low. I wanted to say, in regard to saying the publishers felt
they would be for the copying if they felt it would increase their
publications, I feel that the copying now is not affecting the number
of subscriptions, and I think they pretty much realize that too.
I think they are concerned about what may come in the future — ■
without putting words in their mouths — ^but we found that in discus-
sion with them. Here it has been now over 60 years since we have had
a copyright law; they see systems increasing, networks being estab-
lished
Mr. Danielson. I would like to urge that we conclude expedi-
tiously, we have four more witnesses. I don't want to cut you off, but
could you make your answers as precise as possible ?
Mr.' Pattison. I think I miderstand that problem. I think I can
understand, and I am sure you can, too, some of the concerns the
publishers may have. If in fact people do decide that there is no pro*
tection at all, then all the lawyers in the town can get together, for
instance, and subscribe to the lejral journals and iust send them around.
I'm not saying that lawyers could ever agree to that, they can't
agree on anything, but that kind of thing could happen. I suppose
that is the answer, the prospective problem is worse than the current
one.
Mr. Marke. I'm sorry, just in this context, there is also an obliga-
tion on the publishers, perhaps, to change their practices, they haven't
been changed since Gutenberg. They ought to look into this area and
see what they can provide in the way of services, which would increase
their profit as well. We want to cooperate with them, we want to give
them every opportunity to make a profit.
Mr. Pattisoist. That is a very good point.
199
Mr. Danielson. Will someone give me a very concise definition of
"page charges", what are they, and who pays them to whom ?
Mrs. Adams. Authors pay publishers of scientific and technical jour-
nals. These charges are based on the length of the article.
Mr. Daneelson. In other words, if I have written a scintillating
article on something I must pay the publisher to have it published.
Mrs. Adams. That's right.
Mr. Danielson. Thank you.
Thank you, ladies and gentlemen for a very informative discussion
here. We will move along rather quickly because we have four more
witnesses who will, I know, help us solve tliis simple little problem.
[The prepared statement of Edmon Low is as follows :]
Statement of Edmon Low, Representing American Association of Law Li-
braries, American Library Association, Association of Research Libraries,
Medical Library Association, Music Library Association, Special Libraries
Association
I am Edmon Low, Director of the Library of New College, Sarasota, Florida.
Today I will present the views of the American library community as represented
through six major library associations. With me are representatives of each
of the six associations, and three attorneys. These individuals are here to
answer questions of particular concern to the members of their associations,
if Members of the Subcommittee so desire.
I am happy to introduce them to the Subcommittee at this time. The in-
dividuals at the witness table are from my right (the Committee's left),
American Association of Law Librarians, Julius J. Marke, Chairman of the
AALL Copyright Committee; Association of Research Libraries, John P. Mc-
Donald, Executive Director. Sitting behind Mr. McDonald is the ARL counsel,
Philip B. Brown of the law firm Cox, Langford, and Brown, Washington, D.C. ;
American Library Association — I am representing ALA as Chairman of its Copy-
right Subcommittee, as well as presenting the unified testimony. Sitting behind
me is the ALA counsel, William D. North of Kirkland and Ellis law firm in
Chicago ; Medical Library Association — Mrs. Joan Titley Adams, Chairman of the
MLA Copyright Committee; Music Library Association, Mrs. Susan Sommer, a
member of the Association's Board of Directors and Chairman of its Copyright
Subcommittee ; Special Libraries Association — Dr. Frank E. McKenna, Execu-
tive Director. Sitting behind Dr. McKenna is James A. Sharaf, Counsel of the
Harvard University Library.
We are here today to talk about library copying and the provisions of the
copyright revision bill (H.R. 2223). Because our time for presentation of testi-
mony is very limited, I shall be presenting so far as I am able in the time allotted
the concerns of all these various groups. However, each of these organizations
will also be filing a statement of its own setting forth in greater detail its indi-
vidual concerns about provisions of the bill, and all of these representatives will
assist me in answering particular questions you may have concerning our tes-
timony and the issues raised. Although our testimony today is limited to library
photocopying which is the subject of this hearing, there are other provisions of
the bill which concern us and about which we may be making further statements
as other hearings are scheduled.
I would like first to point out that, although this copyright revision bill has
been under consideration for ten years, the library photocopying issue is still r.n
important unresolved subject. In brief, the question which Congress must decide
is whether libraries wiU be permitted — at no additional expense — to continue
to serve the public by the long-standing practice of providing single copies of
copyrighted material for a user's research or study. It is an issue with direct and
widespread impact on the general public. It involves both the right of access to
library materials and the cost of that access.
In the past year there have been two major developments affecting this ques-
tion. In the first case ever brought by a publisher, the Williams & Wilkins Com-
pany, the courts have upheld the photocopying of single copies of copyrighted
medical journal articles as being within the doctrine of fair use and not consti-
200
tuting infringement of copyriglit. It is in part because this case consumed seven
years and major financial outlay that libraries are concerned about the second
major development, which is the introduction last year into the Senate bill,
without any hearing, of a new and undefined limitation on the rights of libraries,
namely, the concept of "systematic reproduction" of either single or multiple
copies of copyrighted material.
Now, when we talk about library copying we are not talking about something
for the benefit of libraries or librarians, we are talking about something that
is carried on for the benefit of users of libraries who include citizens from all
walks of life throughout the country. When we talk about library copying prac-
tices, we are talking about the schoolboy in Caliiornia who may need a copy
of an article in the Los Angeles Times for a project he is working on in his
ninth-grade class ; we are talking about a judge in a county court in Middlesex
County, Massachusetts, who may find he needs a copy of a law review article
which" bears directly upon a difficult question of law which has arisen in the
course of his work ; we are talking about a doctor in downstate Illinois who
has a patient with an unusual and rare disease and the only recent material to
be found is contained in an obscure journal published in Sweden and available
only through the Regional Medical Library System, but which article may aid
hiiu in saving his patient's life ; we are talking about a Member of this Com-
mittee asking the Congressional Reference Service of the Library of Congress
for an article dealing with copyright ; and we are talking about a musician who
is preparing a scholarly article on the music of Mozart and needs to take with
him to his study a copy of a portion of a recently edited score of one of Mozart's
works with which he is concerned. The list is endless, but I wish to emphasize
that we are talking about an issue that very broadly afiiects the ability of people
in this country to make use of their libraries which are the repository and store-
house of man's knowledge.
It should be noted here that copyright is not a constitutional right, such as
trial by jury of one's peers. The Constitution simply authorizes Congi-ess to
create the right. It is therefore a statutory right — one created by law- — and may
be changed, enlai'ged, narrowed, or abolished altogether by the Congress here
assembled. It is a law enacted not for the benefit of an individual or a corpor-
ation but for the public good and with the purpose, as the Constitution expresses
it, "to promote the progress of science and useful arts." Consequently, in revis-
ing the copyright law the problem for Congress is to design provisions which
both encourage the creation of original works and permit the widest possible
access to and dissemination of information to the public ; and, where these goals
compete, to strike a balance which best serves the fundamental objective of
promoting learning, scholarship, and the arts.
It is now generally understood that a single collection of books or other re-
corded forms of thought as represented by any library can contain only a fraction
of the total amount of material in existence. Even the Library of Congress, pos-
sibly the largest single collection of materials in the world, does not have many
thousands of titles which exist in the United States, to say nothing of those else-
where in the world, while on the other hand even a relatively small library will
often have titles not found anywhere else in the country. The location and cata-
loging of these titles, and of articles and journals, and the making of some avail-
able readily through photocopying or loan — the dissemination of knowledge — is
indispensable to education and research and often involves the re])rodnction by
photocopying of a portion of a monograph or a journal article protected by copy-
right.
Library photocopying may be roughly divided into two groups, the first being
that done either by a member of a library staff or by the user himself from
material in the library for immediate use on the premises or nearby ; the second.
th.Tt done by one library for and at the request of another library, often some
distance away, for use by one of its patrons there. The first is oft^n designated
"in-bouse'' copying, while the second we usually refer to as "'interlibrary loan."
The first is often necessary if a patron is to compare and study several'articles
from large bound reference volumes as for instance a student writins a term
paper in the lilu-ary. The second is of vital impoi-tance in that the scholar or
other user does not have the document in hand and therefore it is his only prac-
tical access to what may be highly important material for information or re-
search.
At present I am Director of the New College Library at Sarasota, Florida. New
College is a small, but very fine, frivate college and its problems in this con-
201
nectioD are typical of the two thousand small and medium-sized colleges through-
out the country. While our library is liberally supported and spends every cent
it can afford on periodical subscriptions, we cannot possibly have the large re-
sources of a university like the one at Gainesville or at Tallahassee. Yet our
faculty members, if they maintain a good quality of teaching and do the research
which contributes to it, must have access by random photocopying at times to
the larger collections in the state and elsewhere.
It is usually not known that the interlibrary loan arrangement often encour-
ages the entering of additional subscriptions by the library rather than reducing
the number as is often charged. It is a truism that a librarian would prefer to
have a title at hand rather than to have to borrow even under the most con-
venient circumstances. Consequently, when the time comes around each year to
consider the list of periodical subscriptions, the record of interlibrary loans is
scanned and titles are included from v.-hich articles have been requested with
some frequency during the year. While the situation varies, in our library the
number is two ; if we have had two or more requests for articles from the same
title during the year, we enter a subscription. This not only indicates how the
procedure can help the periodical publishers, but also indicates that if only one
article or none was copied from a title during a year, the joiirnal could not have
been damaged materially in the process. It is not only the small schools which
would suffer if such photocopying were eliminated, however; the scholars at
Wisconsin or Michigan would also be severely put to it to continue their research
in the same way, and it is these scholars who account for the major writing for
the scholarly journals. The journals themselves, therefore, have a stake in seeing
tliis procedure continued in a i*easonable way.
Courts have long recognized that some reproduction of portions of a copyrighted
work for purposes of criticism, teaching, scholarship or research is desir-
able and this judicial concept, known as "fair use," is incorporated in sec-
tion 107 of the revision bill. Libraries have operated all these years under this
principle, but it does lack the assurance of freedom of liability from harassing
suits which the librarian needs in his work. This fair use concept is necessarily
expressed in general language in tJie bill, so a librarian will not be able to be sure,
until a court decides a particular case, whether his action, undertaken with the
best of intentions to aid a patron, is or is not an infringement. This is pointedly
illustrated by the recently decided, previously mentioned case of Williams «&
Wilkins vs. the National Library of Medicine and the National Institutes of
Health for photocopying. This suit was instituted in 1968 and only now after years
of litigation and expenditures of many thousands of dollars on each side has
it been determined that the defendants were properly obeying the law after all.
Fair use, then, is not really a right to copy any given thing, but only a defense
to be invoked if one is sued. This threat of suit, even if one is able to maintain
his innocence in court, is very real because suits are costly in proportion to the
amount for which one is sued. This revision bill provides not only for demand for
actual damages, but also one can be sued for statutory damages up to limit of
$50,000 for each imagined infringement. Thus, harassing but unjustifiable suits
are really invited by this bill.
In light of the above, we librarians believe that In addition to Section 107
delineating fair use, further protection is needed to assure that it is permissible
to make a single copy as an aid in teaching and research, including a single copy
as part of an interlibrary loan transaction, and that such activity, in behalf of
the public good, is not subject to possible suit. This assurance has now been
largely provided in parts of section 108 (a) through (f), for which we are very
appreciative. However, we are greatly concerned with the addition of subsections
108 (g) (1) and (2), and (h), which take back the very rights set forth in 108
(a) through (f). These are provisions which came into the bill in the Senate
after hearings were concluded in 1973, without the opportunity for discussion by
library representatives with Senator McClellan's Subcommittee. Today's hearings
are the first opportunity we have had to express publicly our very deep concern.
Before discussing subsections (g) and (h), I would like to note tliere is also a
particular problem in the interpretation of section 108(a) which can affect
specialized libraries in business, industry, and commerce. This is discussed in the
individual statement of the Special Libraries Association.
Subsection (g) (1) gives us concern because often there is no basis for a library
employee to judge whether a request for a copy represents "isolated and unrelated
reproduction" as specified in sec. 108(g)(1). For example, if a college in-
structor in a graduate seminar in Englisli were to recommend to his students,
57-786— 76— pt. 1 14
202
some ten men and women sitting around a table, that they read an article on
Milton's poetry that appeared ten years ago in Publications of the Modern
Language Association, and if two of them over the next week were to go to that
college's library and look at that article and decide that they wanted to take
copies back to their dormitory for further study, we don't see how there is any
practical way in which a library can prevent that kind of reproduction of a single
copy on separate occasions, and we don't think they should have to. And yet, the
Senate Committee report on S. 1361 (S. Rept. 93-983) cites such an instance.
Section 108(g) (2) says that the rights of reproduction and distribution do not
extend to a library which "engages in the systematic reproduction or distribution
of single or multiple copies or phonorecords of material described in subsection
(d)." The materials referred to in (d) are journal articles or small portions of
other copyrighted works.
The question immediately arises as to what constitutes systematic reproduc-
tion. To the extent that we are able to puzzle it out, it appears to have been
aimed at practices of the kind which were upheld as fair use by the Court of
Claims in the Williams d Wilkins case. In listening to my publisher and author
friends, the preeminent example which they give of systematic reproduction has
always been the Regional Medical Library System, with the National Library of
Medicine at its apex. Those practices of the National Library of Medicine were,
of course, upheld by the Court of Claims in Williams d Wilkins in a decision
which was affirmed this year by the United States Supreme Court.
Now, how does the Regional Medical Library system really work? Well, it
starts oft with the user, who discovers that he needs access to some particular
information, often found in an article in a professional journal in the biomedical
field. He usually starts off by going to the library in the hospital with which his
practice is affiliated, and may find it there. If it is one of the most important
journals, the hospital may well have it. But, since there are thousands of journals
in the medical and health sciences field, the chances are that the hospital library
may not have this, particularly if it is older material. The request would then go
to one of the eleven Regional Medical Libraries over the country which are sup-
ported by Congress, and from there as a last resort to the top of the pyramid
which is the National Library of Medicine and which now has over 25,000 differ-
ent journals, the biggest medical collection in the world. It is obviously not pos-
sible for the smaller hospital library, or sometimes even the Regional Medical
Library, to have a sizable portion of this vast amount of material, so some kind of
access, such as photocopying, must be relied upon to get the information to the
doctor or the other health professional when urgently needed. This kind of orga-
nization of access to scientific and technical knowledge seems to us to be the
intelligent way of doing things. It should be noted also that the Regional Medi-
cal Libraries are not only striving to augment their collections as rapidly as
possible but likewise are urging the smaller hospital libraries to upgrade theirs,
thus providing all along the line an ever-increasing number of subscriptions
with accompanying increased financial gain for the publishers. Mrs. Joan Titley
Adams, of the Medical Library Association, who is with us here today, can pro-
vide for any of the Committee members who are interested further details about
this highly significant work in the medical and health fields.
Another large and highly important type of system for which this systematic
reproduction poses problems is that of the county and multi-county library sys-
tems throughout the whole country. These libraries came into being largely
through the opportunity provided by the federal Library Services and Construc-
tion Act. This was and still is an effort to bring books and other library materials
to the millions of people, often in rural areas, who had not heretofore had library
service available. To get counties to join together, vote the necessary taxes, agree
on a common governing board, and gain consensus on the sites for a central li-
brary and for the smaller satellite libraries in the system is a diflScult task. It is
often made possible only by the promise to the citizens of much broader areas of
information which will be made available to them not only from their small but
growing collection in each neighborhood, but also through loans from the central
library and through it from larger collections elsewhere. In this, some copying of
periodical articles is occasionally involved, but it does not result in fewer sub-
scriptions— in fact, before the founding of many of these libraries there were no
periodical subscriptions at all in the area.
Because interlibrary loan is one of the vital elements in this concept which
has been so mutually beneficial to all, it is urgent that no restrictions be imposed
203
which would diminish the effectiveness of the program. Such a diminution, if
it occurred, would be as much against the interest of the publishers as against the
citizens the libraries serve. Let me give you an illustration from my home state of
Oklahoma which I know well. A few years ago, the Western Plains Library
System was established consisting of four counties in Western Oklahoma. At the
time of its organization, there was a single library in each of two counties. The
other two had no libraries. Now there are seven libraries in the four counties
and two bookmobiles are operating regularly. At the beginning the two original
libraries subscribed to 20 periodicals between them. The seven libraries now
subscribe to over 300. The combined annual book budget of the two original
libraries was under $2500. The annual book budget for the seven is now $42,000.
In addition, they have encouraged school libraries to develop collections of peri-
odicals and books and are now promoting with success the creation of home col-
lections of books and periodicals. This tremendous increase in acquisition of
materials has obviously benefited the publishers of materials as well as the
citizens the libraries serve.
This kind of multi-county library is now found in every State in the Union,
and over the two decades the Library Services and Construction Act has been in
existence millions of dollars of federal money and matching local funds have
been expended for this kind of service. The importance of this activity was
recognized in the Senate report last summer accompanying S. 1361 (S. Rept.
93-9S3) in the portion discussing systematic reproduction by saying, "The photo-
copying needs of such operations as multi-county regional systems must be met,"
but' no provision was made in the law to specifically provide for these needs.
Section 108(g) (2) would prohibit their copying activity and do much mischief
indeed.
It was also pointed out to our publisher friends that many systems are not
organized for the purpose of copying materials of any kind. For example, one of
the large "systems" is SOLINET, an acronym for Southeastern Library Net-
work. This is a group of about 100 libraries in the Southeastern States devoted
solely to providing centralized cataloging and catalog card preparation and dis-
tribution to member libraries. Other systems have the purpose of encouraging
the building of better library collections and the bringing to the area more jour-
nals, sets and bibliographies not now represented in the areas. To say that a
library merely because it happens to belong to such a "system" is prohibited
from photocopying where if it did not belong, it would be permitted to do so,
seems to us farfetched indeed.
We are also concerned with section 108(h) which would limit the rights other-
wise granted under section 108 by excluding a musical work, pictorial, graphic
and other audiovisual works. These exclusions are illogical. The need of the
scholar doing research in music for a copy of a portion of a score is as legitimate
and proper as that of the scholar doing any other kind of research. Likewise, the
copying of one map from an atlas or a page of diagrams and plans from a tech-
nical journal may be just as important as any other kind of material for
research.
It seems to us that libraries ought to be encouraged to collect and preserve all
of the forms in which knowledge is published and distributed, and that it should
be possible for users of libraries to have access for their study and scholarship
to all of these forms, not just some of them. If a student of the cinema asks a
library to make a copy for him of a few selected frames of some famous motion
picture which is being studied, so that he may consider at his leisure a certain
key point which is made in an article he is reading, we think the library ought to
be able to do that.
Mrs. Susan Sommer of the Music Library Association is with us today and
can provide further information about the problems posed by this section of the
bill in relation to music. Dr. Frank McKenna, of the Special Libraries Associa-
tion, is also here and can discuss the problems in relation to atlas or other graphic
materials in books and periodicals.
In reporting S. 1361 last July, the Senate Judiciary Committee recommended
that "representatives of authors, book, and periodical publishers and other owners
of coprighted material meet with the library community to formulate photo-
copying guidelines to assist library patrons and employees." And concerning
library photocopying practices not authorized by the reported bill, the Committee
recommended "that workable clearance and licensing procedures be developed."
In response to this request by the Senate Judiciary Committee, representatives
204
of the different views on this subject were convened in November 1974 by invita-
tion of the Register of Coyprights and the Chairman of the National Commission
on Libraries and Information Science. The resulting "Conference on Resolution of
Copyright Issues" established a smaller working group to carry out preliminary
discussions. The working group and several subcommittees have since met on
frequent occasions to consider and prepare papers on a variety of technical and
procedural matters.
There are, of course, different views of the significance of the work performed
to date by the Conference and its working group. The work has focused upon the
mechanics and the feasibility of possible mechanisms for collecting payments
for photocopying of copyrighted materials. It must be emphasized, however, that
there has been no agreement as to whether such a payment mechanism is accepta-
ble to libraries even if it is workable, and also I may say no seemingly workable
mechanism has yet been advanced in that it still appears it would take dollars
to collect dimes. There has also been no agreement as to the categories of pub-
lications to which such a mechanism should be applied and no change in the posi-
tion of libraries that their current photocopying practices are entirely lawful and
within the fair use holding of the Williams & Wilkins case, and should not in any
respect be treated as infringing rights of the copyright proprietor in the provisions
of any new legislation.
The publishers will probably tell you that they, too, are for photocopying but
they want money for it without any outlay or trouble on their part. I should like
to point out some reasons why licensing and payment of royalties by libraries for
the photocopying they do is not justified. First, many publishers already have
variable pricing for journals ; that is, they charge a considerably higher price
for the same journal for a library subscription than for an individual subscription.
These prices to libraries often run quite high — subscriptions of $100 to $300 per
year are not uncommon ; a few run $1,000 or more ; and the $50 to $100 price is
quite commonplace in the scientific field. These higher subscription prices to
libraries presumably are designed in many cases to include charges for antici-
pated copying. ,Some journal publishers have received substantial federal assist-
ance in modernizing their editorial and manufacturing procedures. Other journals,
and also some of those just mentioned, have already had major contributions of
public funds in the nature of per-page charges, usually in the range of $50 to
$100 per printed page paid by the author or by a federal grant which is financing
his work. The author is usually not paid by the publisher for his work in writing
the article but the library or the institution where the author is located often
spends a sizable amount for interlibrary loan postage and handling to aid him in
preparation of his article which the periodical then receives without cost. As an
example, my own small library spent during this past year over $100 on inter-
library loan expense for books to enable a professor to write an article for an
historical journal, but the journal did not pay him anything for the article.
In light of these contributions which the libraries and the public already
make to the publication of these works, it seems unreasonable for journal
publishers to demand still further payment from libraries, and eventually the
public, for the occasional photocopying of individual articles for library users.
It seems even more unreasonable in view of the fact that by making the infor-
mation concerned available to those with current, specific needs for it. library
photocopying fosters the basic purpose of the authors of such articles. But when
it is also noted that there is no evidence that the libraries' policies have caused
publishers any harm whatsoever and may actually increase their subscriptions,
it is clear that such demands are completely unjustified and the public interest
requires that they be rejected by Congress.
For the reasons we have advanced above, we urge that sections 108(g) (1)
and (2) and (h) be deleted from the bill. This would also be in accord with the
Williams & Wilkins decision and would permit libraries to continue the long
established library service of providing a single photocopy of a single article
or excerpt from a copyrighted periodical or book for a patron's use without
incurring liability for copyright royalties.
It has been a pleasure to appear before you today, Mr. Chairman, and I assure
you that we are ready to be of assistance in any way we can toward a satisfactory
resolution of this very difficult but important problem.
[The following prepared statements and correspondence were re-
ceived for the record :]
205
Statemea^t of John P. McDonald, Executive Director, Association of
Research Libraries
The Association of Research Libraries, an organization of the principal uni-
versity and research libraries in the country, believes that the copyright revision
liill ultimately approved by the Courts, Civil Liberties and the Administration
of Justice Subcommittee must include provisions which will ensure that the
customary, long-established library service of providing a single photocopy of a
single article or excerpt from a copyrighted periodical or book for a patron's
private use may be continued without incurring liability for copyright royalties.
The bill adopted by the Senate last year, and reintroduced in the 94th Con-
gress as H.R. 2223, gives explicit recognition to and protection for library photo-
copying. However, that bill also incorporates provisions in Section 108 (g) which
encumber and confuse the expressly recognized right to an extent that would
severely hamper libraries' service to the public and exclude practices which are
presently lawful. It is imperative that the bill be amended to restore to libraries
and the public the rights which they presently enjoy to make limited photocopies
of copyrighted works. Section 108(g) (2) should be removed from the bill because :
1. It restricts practices which are reasonable, customary and lawful under the
decision in the Williams & Wilkins case. 2. Copyright owners {e.g., publishers)
have advanced no evidence showing that such practices in any way injure their
economic interests, much less evidence that it is in the public interest to forbid
them. 3. The cost of the libraries and ultimately the public of prohibiting or
imposing a royalty requirement upon such practices will be extremely high.
4. The primary purpose of the authors of the sorts of articles most frequently
copied is to disseminate the results of their research, not to earn royalties.
At issue is the making, whether at the request of a patron or at the request
of another library, of single copies of copyrighted matter for the private use of
a scholar or other reader. Such copies may be of articles from law reviews, medi-
cal journals or scientific or technical periodicals, or they may be passages from
other published works. They are made in response to individual requests for
single copies, although more than one individual may request a copy of a par-
ticular part of a work in a library's collection. In providing this service, a library
may make a copy from a work located on its premises, or in the case of a work
not in its own collection, it may request the copy from another library, just as
it might obtain the original work itself on an inter-library loan for a patron who
wished to borrow it. The right to make a single copy for personal use is im-
portant to a wide variety of scholars and other library users, from the high
school student who wants a copy of an article in a issue of a magazine for a
debate or science project to the physician requiring the material for research
work or patient care. In the overwhelming number of cases it is the only way in
which a researcher can obtain a copy of an article from a issue of a periodical
for reference.
Both libraries and the public have traditionally considered the making of
such copies to be a natural and necessary part of libraries' services to their
users. It is simply one way in which published material is made accessible. Such
copies have been "made by photographic and other reprographic techniques since
before the enactment of the 1909 Copyright Act. No court has ever held that
these traditional practices result in liability under the copyright law, and in
the test case brought by publishers, WilUatns d Wilkins v. United States, the
U.S. Court of Claims held that the libraries' practices were a fair use of the
pul)lished materials. That holding was recently affirmed by the United States
Supreme Court.
It is vital that the copyright revision bill recognize the right of libraries to
make single photocopies of works for the private use of patrons without incur-
ring liability under the copyright law. Although Williams & Wilkins is authority
that traditional library photocopying is within the doctrine of "fair use", express
statutory treatment is necessary to remove the threat of suit against libraries
ari.sing from varying judicial interpretations of what is or is not "fair use".
Failure to include such provisions would abandon this area of major public inter-
est to judicial "legislation", and could lead to further costly litigation.
Section 108 of H.R. 2223 extends the necessary recognition, but limitations writ-
fen into its provisions, principally in Subsection 108(g) — and particularly clause
(2) of that subsection — seriously erode the rights which it intends to recognize.
Claiiise (g)(2) excludes from the library photocopying permitted under Sec-
tion 108 any instance of "systematic reproduction and distribution". Because this
restriction was written into the bill by the Senate Patents, Trademarks and
206
Copyrights Subcommittee at the last minute (after public hearings had been held)
and is only vaguely and confusingly explained in the committee report, it is impos-
sible to determine exactly what it means. Such cursory explanation of the limita-
tion as was offered by publishing interests before this Subcommittee seems to
confuse it with "related or concerted" reproduction — which is separately treated
by Section 108(g) (1) of the bill — and merely disguises the real import of the
restriction. It appears, however, to be potentially applicable whenever a library
makes a photocopy of an article or other portion of a published work in the con-
text of a "system". There are, of course, many such systems of libraries, from
city or county branch library systems to the university with branch campuses
to regional library consortia. When it applies. Section 108(g)(2) would reach
the making of a single copy for a single requester, of any part, however small, of
a copyrighted work. It is precisely the right to make such copies which Section
108 was intended to confirm.
The Senate Judiciary Committee report states that systematic reproduction or
distribution within the intent of Subsection 108(g) (2) occurs "when a library
makes copies of such materials available to other libraries or groups of users
under formal or informal arrangements whose purpose or effect is to have the
reproducing library serve as their source of such material." An example which
seems to fit this description would be arrangements under which the Legislative
Research Service of the Library of Congress provides copies of materials, such
as articles from economic or business periodicals, at the request of Members of
Congress. An example listed by the Senate committee's report is the case in which
a branch of a library system obtains at a user's request a copy of an article which
it does not carry in its own collection. The example most frequently cited by
publishers is the regional medical library system, by which local hospital and
medical school libraries have access upon request to seldom-read and highly
specialized periodicals carried by regional medical libraries or the National Li-
brary of Medicine. Each of these examples involves practices which are tradi-
tional and obviously reasonable. Just such photocopying practices of the NLM
were at issue in the Williams & Wilkins case and were held to be lawful.
The sole rationale offered for the new restrictions is an assertion that they are
necessary in order to prevent present and potential subscribers from relying on
library photocopying machines in the place of journal subscriptions. That asser-
tion is simply and clearly not valid. The argument has a certain surface plausibil-
ity, but in spite of the many opportunities presented to them, notably in the
Williams & Wilkins case and most recently at the hearings before this Subcom-
mittee, publishing interests have never offered any evidence to substantiate their
claims of damage or to show that their fears for the future have any basis in
fact within the context of the limited library photocopying which would be recog-
nized under subsections (a) through (f) of Section 108. In Williams & Wilkins
such an inference of injury mistakenly indulged in by the presiding Commissioner
was overruled by the Court of Claims which held instead that "this record . . .
fails to show a significant detriment to plaintiff but does demonstrate injury to
medical and scientific research if photocopying of this kind is held unlawful."
The publishers' reference to practices by the University Microfilms subsidiary of
the Xerox Corporation has no relevance to library photocopying, and the firm's
profit-making (and royalty-paying) enterprise geared to the reprinting of multiple
copies of articles and entire journal issues would clearly be outside the provisions
of Section 108 in the absence of Subsection 108(g).
What evidence is available strongly suggests that traditional library photo-
copying does not injure publishers, and in many instances may actually increase
subscriptions. It is reasonable to suppose that libraries which have frequent
requests for particular works will purchase those works, if they are available,
to better serve their users and avoid the delay and administrative expense neces-
sarily involved in inter-library loan transactions. Results of ARL's examination
of one inter-library loan network showed a very low rate of coincidence among
requests. Rarely was the same article requested by the libraries. It also revealed
that 54 percent of all requests were for foreign periodicals and domestic pub-
207
lications not covered by copyright, and that of the remaining 46 percent, 29 per-
cent of the requests were for publications more than 5 years old, and only 17
percent of all requests were for materials five years old or less. In view of the
facts that the overwhelming volume of photocopying involved neither current
publications nor multiple copying of the same publications, it is manifest that
the photocopying by the libraries was not taking the place of subscriptions.
Indeed, library photocopying services may actually help to increase subscriptions,
by providing a kind of advertising for the periodicals in which requesters find
articles of value.
"While there is no evidence that prohibiting traditional library photocopying,
or compelling libraries — and ultimately the public — to pay copyright royalties
for such photocopying will make any contribution to the promotion of science or
the arts, or that there would be any other benefit to the public, it is manifest that
the direct and indirect costs of the prohibition will be great. Simply to ascertain
that a royalty is payable and to collect, account for and remit the royalty will
involve heavy administrative costs. If these accounting charges are passed on to
library patrons, they will magnify the direct cost impact on the public, and
discourage use. If the cost is charged to the libraries' periodicals budget, it will
mean reduced subscriptions, resulting in a decrease in the periodicals available
to library users and loss of subscription income to publishers. Another cost
will be increased theft and mutilation of publications ; and the more libraries
have to spend for repair and replacement of mutilated material, the less they
will have to spend on new books and journals. But perhaps the heaviest cost
of all will be the intangible cost to scholarship, research and education resulting
from the deterrent effect which imposition of a royalty fee will presumably have
on students and other researchers whose work is assisted and simplified by
ready access to photocopies for reference.
The question which this Subcommittee is called upon to answer may be simply
put. Should a library be prohibited from making, at a user's request, a single
copy of a journal article or of an excerpt from another published work, or liable
for a royalty fee simply because it obtains the copy from, or supplies it to a
branch library, a library member of a county or regional library system, or
other consortium of libraries? Because it is clear that such customary copying
by libraries is responsive to specific, specialized needs of library users provides
the public access to materials which would otherwise be unavailable and does
not in fact serve as a substitute for svibscription to the publications concerned,
the answer must be that libraries should not be so prohibited or so liable. It is
clear that the publishers' insistence on a provision which would limit libraries in
this regard has little or nothing to do with concerns over actual or potential
subscription losses. For the most part subscriptions have increased, with tem-
porary reductions being due to heavy competition from other publishers or to
increases in subscription rates which in recent years have outpaced consumer
price indexes. The real reason for the conflict over library photocopying lies in
its apparent potential as a lucrative new source of royalty income. Indeed it is
the publishers' insistence that the libraries agree to pay royalties on their fair
use copying which has been responsible for the breakdown of the many attempts
to bring the parties together to resolve photocopying issues.
The Association of Research Libraries submits that the direct and indirect
cost to the public of imposing the restrictions on traditional library photocopy-
ing contemplated by Subsection 108(g) (2) far outweigh any foreseeable benefit.
We submit that Subsection (g) (2) is totally inconsistent with the constitu-
tionally-mandated objective of copyright legislation — to promote the Progress
of Science and useful Arts — and should be deleted from H.R. 2223.
Statement of Claka Steuermann, Peesident, Music Libeaby Association
On behalf of the Music Library Association, I should like to offer a statement
on the proposed bill for the revision of copyright (H.R. 2223) and request that
208
this statement be included in the record of the hearings held May 14, 1975 by
Representative Robert W. Kastenmeier.
The Music Library Association, on behalf of the public which its members serve,
wishes to take exception to the exclusion of music from the library copying
privileges specified in section 108 of H.R. 2223. We feel that patrons of music
libraries should be granted the same rights of access to information as are
extended to library users in other fields. We maintain that failure to recognize
this equal right of access is discrimiuatoi-y and contrary to the public interest.
Although music may occupy a special position in the concert hall or on the air,
music in the library is not substantially different from any other subject collec-
tion in the library. Music is widely studied in schools and uni^•ersities not only
as a performing art but as a humanistic discipline equivalent to English literature
or history, and music libraries are constituted to serve these studies.
Most music libraries are located in large universities, liberal arts colleges,
conservatories and large public libraries with extensive research collections.
Music libraries are the repository for one thousand years of Western culture, the
period for which we have notated readable records of our musical heritage.
Scholars and students come to music libraries to examine and study these works.
Such study is a demanding discipline and serious students need to study, analyze,
and compare portions of complex musical scores in the same way that advanced
students of medieval history, French, or biology need access to data in their
respective fields. Just as the plays of Shakespeare represent more than a vehicle
for actors to a specialist in English literature, so the symphonies of Beethoven
are of intellectual and aesthetic concern to students and scholars of music.
Perhaps the committee is unaware that the exclusion of music in clause (h)
of section 108 would restrict the works of Bach, Beethoven and Mozart as well as
those of living composers. Edited versions of music from any century may be
registered for Class E (musical composition) copyright. It is, in fact, almost im-
possible to find a score of any kind published in this century which does not bear
a copyright notice, and this notice makes no distinction between editorial and
authorship copyright. Thus the exclusion of music works in clause (h) will
affect study not only of the music of Bela Bartok who died in 1945 but of works
by Wolfgang Amadeus Mozart (d. 1791) and Guillaume de Machaut (d. 1377).
Such restriction may not be the intent of the legislature, but it wall be the effect
of the statute as it now stands.
Another characterization of music is the practice of issuing scholarly editions
in large multi-volume anthologies and collected works. Such sets are customarily
found only in libraries. Many of them have been out of print for years. Because
of their value, volumes of such sets are rarely available for circulation. Restric-
tion of photocopying from such editions as included in 108 (h) would relegate
their contents to library shelves where only those with time and the ability to
use the scores in the reading room could benefit from them.
By way of contrast, most music libraries are not concerned with ephemera.
For instance, the multitudinous lead sheets and guitar arrangements which
constitute the bulk of copyright registrations do not find their way into the
regular collection of the Library of Congress, much less into smaller libraries.
Economics alone makes it impractical for libraries to house and care for material
which does not have some social significance or enduring aesthetic value. Music
publishers are apparently most concerned about the protection of current, salable,
comparatively simple compositions. Restriction of library copying is not a very
practical way to go about this. First, as we have pointed out, such works are
not necessarily likely to be found in libraries. Secondly, any musician bound on
infringement of such work, a popular song for example, could certainly take a
melod.v and harmony down by ear from a recording or the radio more easily than
he could locate a copy in a library.
Evon j^irofessional performers of serious music do not use library copies to study
and perform from. A pianist or a singer would rather have his own score if
possible, one he can mark for his personal use and one he can keep forever. Even
209
photocopies do not have the convenience of the publisher's binding which is vital to
the life of a well used score. Of course serious performers use libraries but it is
chiefly to enlarge their horizons and understanding that they do so.
In any case we would like to remind the committee that the privileges granted
in section 108 only apply to material which cannot be obtained through current
trade sources. Presumably publishers will respond to popular demand by supply-
ing materials to fill this need. On the other hand the library is frequently the
only source for obscure, the out of print, the archaic work which is not in great
demand but access to which is urgently needed by a very few.
Apparently the words "a musical work" were included in the exclusions to
section 108 at the instigation of the Music Publishers Association, an organiza-
tion of comparatively narrow economic interest whose chief function is the
management of copyright royalties. We feel that we, not they, represent the public
interest. The copying privileges extended in section 108 are not in the personal
interest of librarians except insofar as the librarians are concerned for the
public whom they serve. Photocopying certainly means more wear and tear on
the books, and probably means more work for the librarian. The Music Ijibrary
Association here speaks not for its members' convenience, but on behalf of the
students and scholars who use our collections.
The existence of section 108 in H.R. 2223 recognizes the enrichment to our
culture which scholarly study and its encouragement through libraries provide.
Music is a vital part of our cultural heritage and its study as such is recognized
as a legitimate scholarly discipline. There is no valid distinction between the
scholarly use of music in a library and the similar use of scholarly materials
in other disciplines. The exclusion of music from the privileges granted in section
108 would unfairly cripple musical scholarship, including researcli on music of
the past as well as that of the present. Such an action would discriminate against
musical scholars and would be coxitrary to the best interest of tlie public who are
the ultimate beneficiaries of scholarship in general. Therefore, we respectfully
request that the House Subcommittee on Patents, Trademarks, and Copyrights
eliminate the words "a musical work" from section 108(h) of II. R. 2223.
Statement op Frank McKenna, Executive Directoe, Special Libraries
Association, May 14 1975
Special Libraries Association wishes to record its substantial agreement with
the provisions of §§ 106, 107 & 108 relating to library photocopying in H.R. 2223
(Revision of the Copyright Law). We wish, however, to make two specific
comments and to urge that two siiecific changes be made :
(a) To comment on one item in § 107. Fair use;
(6) To comment on one item in § 108(a) (1) ; and
(c) To urge vigorously for changes in two items, in § lOS(g) (1) and (ff) (2).
Reproduction hij libraries and archives.
Our comments are presented in the sequence :
1. Identification of Special Libraries Association and Its Interests.
2. Comments on § 107. Fair Use.
3. Comments on §108. Reproduction bv Libraries and Archives: 3.1 § 109(a)
(1) ; 3.2 § 108(g) (1) & (g) (2) ; 3.3 § 108(h).
4. Conclusion.
1. Identification of Special Libraries Association and Its Interests. — Special
Libraries Association, with 9,000 members, is the second largest library- and
information-oriented organization in the United States, and the third largest
in the world. It is estimated that there are more than 10.000 special libraries
in the U.S. The concept of special libraries — or in better words — the concept of
specialized libraries is not well known among the general public or even in some
segments of the library community itself. The interests and activities of special-
ized libraries are described briefly in this document and in the annexed bro-
chure.^ SLA is an association of individuals and organizations with educational,
1 Annex. Special Library Sketchbook. S.L.A., N.Y. 1972. 45 p.
210
scientific and technical interests in library and information science and tech-
nology— especially as these are applied in the selection, recording, retrieval and
effective utilization of man's knowledge for the general vpelfare and the advance-
ment of mankind.
Special Libraries Association was organized in 1909 to develop library and
information resources for special segments of our communities which were not
adequately served by public libraries or by libraries in educational institutions.
At first the emphasis was on special sub.iect coverage in each special library
as it related to the interests and business of its parent organization, for example :
sources of statistical data for both corporations and the agencies of the national
government and state governments ; business data for banks and investment
firms : chemical information for the then developing chemical industry ; engi-
neering information for the emerging complexes of engineering and construction
companies, etc.
During the past 66 years — and with particular growing needs for rapid informa-
tion delivery since World War II — specialized libraries and information centers
have been established in all segments of our nation's affairs. They exist in for-
profit enterprises and not-for-profit organizations, as well as in government agen-
cies. Some are open to public use, and others have restricted access (because of
security classified materials) or are part of a for-profit organization (because of
proprietary information). During this period of accelerated growth, the original
emphasis on special subjects has been replaced more and more by the concept of
specialized information services for a specialized clientele. An example of such a
specialized information service for a specialized clientele is the Legislative Refer-
ence Service of the Library of Congress. Although the Library of Congress (as a
whole) is often called a "national library," the entire Library of Congress itself is,
perhaps, an outstanding example of a definition of service to a specialized clien-
tele : The Congress of the United States of America.
The specialized clients are normally the employees of the parent organization.
The specialized information services are based on the speedy availability of infor-
mation, both for current projects and for management determination of decisions
regarding future efforts of the parent organization. To these ends, the members of
SLA include not only librarians, but also persons who are subject specialists — so
that they can evaluate and screen out the irrelevant, the redundant and the too
often useless portions of the voluminous published literature. The totality of the
literature includes not only the publications of commercial publishers of copy-
righted books and periodicals, but also the avalanche output of government agen-
cies (often with security handling requirements) plus the parent organization's
own internal corporate documents (with the obvious need to protect proprietary
or competitive information) .
As a parenthetical observation, it should be noted that the pioneering work in
machine use for information storage and retrieval (now computerized) took place
in specialized libraries and information centers in the 1940's and 1950's. Similarly,
the need for miniaturization of the bulk of the literature in microforms occurred
through the influence of S.L.A.'s liaison with designers and manufacturers of
microreading equipment.
Last, but not least, S.L.A. pioneered the concept of information networks — long
before computers and other communication devices had been developed. S.L.A.
has facilitated communications among its members through the Association's
unique information network of Chapters and Divisions. Initiated more than 60
years ago, the network has been frequently updated in response to the needs of
new informational requirements.
S.L.A. is organized in 26 Divisions which represent broad fields of specializa-
tion or information-handling techniques. These fields range alphabetically from
Advertising, Aerospace, and Biological Sciences through Military Librarians^
Museums, and Natural Resources, and on to Transportation, and Urban Affairs.
S.L.A. is also organized in 47 regional Chapters which range geographically
from Hawaii across the continental United States (plus two Chapters in Canada)
and on to a European Chapter (which encompasses geographically all the non-
Socialist countries of Europe) .
Special Libraries Association in its own right is a publisher of three periodicals
and an average of six books per year. Therefore the Association has its own
interests as a publisher to conserve its sales income and royalty income. The
Association's publications are needed by special groups, but they are in such
areas of specialization that commercial publishers (or even vanity presses)
would not touch them because of the small sales potential. Our subscription lists
range from 12,000 as a high to 1,000 as a low. Our book sales average about 1,000
211
copies for each title with a range from 500 to our top category of "best sellers"
at a level of about 3,000 copies sold per title.
2. Gotnments on § 107. Fair Use. — The Association is in agreement with the
delineation of "fair use" as stated in § 107. We feel, however, that it is necessary
to comment specifically on one phrase in Item (4) :
(4) the effect of the use upon the potential market for or value of the copy-
righted work. [Emphasis indicated.]
We recognize that there may be some validity in tlie claims of some publishers
of periodicals that they may have some loss of income due to multiple photo-
copying of a single article from an issue of the periodical that is still avallaUe
in-print. If the issue is out-of-print (that is, if the publisher has not maintained
his stock in-print or in-stock), it is difficult to conceive how a photocopy of
out-of-print material can cause any loss of income to the publisher.
Further, the slow delivery by publishers to fulfill an order for a single in-print
issue is totally unacceptable to the needs of our specialized users who are
responsible for fast management decisions. There is little question that it is an
administrative impossibility to secure publisher permissions to permit inter-
library response within any reasonable time. Moreover, the costs and delays in
seeking such permissions would be prohibitive.
It is also necessary to note that the preparation of photocopies of periodical
articles in libraries can not cause a loss of income to the authors. Authors are
rarely paid by publishers of learned or trade periodicals (either as a one-time
payment or as royalty payments). Indeed, the opposite direction of payment has
become prevalent in recent years : a "page charge" is to be paid by the author
or his employer to the publisher. These page charges are usually in the range of
$50-$100 per printed page.
3. Comments on § lOS. Reproduction ty Libraries and ArcJiives. —
o.l Section 108(a) (1). — The Association is concerned with a possible inter-
pretation of § 108(a) (1) :
(1) The reproduction or distribution is made without any purpose of direct
or indirect commercial advantage; [Emphasis added.]
Clarification of the meaning of the existing language is necessary because a
majority of special library operations are conducted for purposes of "indirect
commercial advantage" when the library's parent organization is in the business,
industrial, or financial communities thru its products and services. It occurs to
us that the existing language of § 108(a) (1) may have been intended to prohibit
a "commercial advantage" to an authorized or unauthorized reprinter or re-
publisher of copyrighted materials.
We feel that our concerns can be alleviated by either of two actions :
( a ) by adding to § 108 (a)(1) a phrase such as
The reproduction or distribution is made without any purpose of
direct or indirect commercial advantage to a reprinter or a repuhlishcr
[Suggested addition italicized.] ; or
(b) through appropriate commentary in the legislative history of H.R.
2223 without any change in § 108(a) (1) as now written.
Legislation to he enacted must not prevent or penalize the preparation of photo-
copies by any library. S.L.A. is, of course, particularly concerned about the status
of specialized libraries — especially those in for-profit organizations. There will
be immeasurable damage to the total economy and welfare of the nation if such
intent were to be contained in the enacted version of H.R. 2223, or if such inter-
pretation is possible after enactment of the law. The rapid transmission of man's
knowledge — either to not-for-profit or to for-profit organizations — must not be
impeded by law.
■Whether libraries request or produce photocopies, the libraries are acting solely
as the agents for the individual and distinct users of libraries who in their totality
represent all strata of our American society.
3.2 Sections 108(g) (1) and 108 (g) (2). — Major concerns are raised by § 108(g)
which was inserted after Senate hearings on § 1361 (93rd Congress). We wish to
submit emphatic comments first on § 108(g) (2) and then to return to § 108 (g) (1).
(2) Engages in the systematic reproduction or distribution of single or
multiple copies or phonorecords of material described in subsection (d).
[Emphasis added.]
The Report accompanying § 1361 (93rd Congress) indicated that it had not
been possible to formulate specific positive examples of "systematic copying." If
212
only negative examples can be developed, can there be any logical basis for the
insertion of § 108(g) (2) ?
Tlie Association urges that § 108(g) (2) be :
(a) Deleted entirely, or
( b ) That it be amended by adding a concluding clause to read :
". . . of matei-ial described in subsection (d) so as to impair the potential market
for a copyrighted work." [Suggested addition italicized.]
The Association is concerned that the inclusion of § 108(g) (2) — as now stated —
in any final Act will seriously impede the spontaneity of research and the research
capability of organizations that maintain special libraries and information cen-
ters whose purpose is to provide access to learned, technical, or specialized
publications.
We are particularly concerned about any future construction that could be
placed on allegations of "systematic reproduction or distribution" in § 108(g) (2^
The single word "systematic" has been shown to have an almost endless number
of interpretations during the discussions of the "Conference on the Resolution of
Copyright Issues" (Nov 1974- Apr 1975). The Conference was jointly convened
by the Register of Copyrights and the chairman of the National Commission on
Libraries and Information Science.
It is important to recognize that all libraries act only as agents for their
clients who request and receive the photocopies. Inclusion of the word "sys-
tematic" does not seem to comprehend the operations of libraries- — or the na-
ture of the requests from clients of libraries. Libraries provide photocopies of
current or past publications in response to single, spontaneous requests from
the library's clients. Research workers are often thought to be isolated individ-
uals, but research itself is not an isolated activity. Therefore, spontaneous, iso-
lated— yet single — requests for photocopies of the same article or segment in
a copyrighted pul)lication may be received from more than one requestor — each
acting independently and spontaneously.
The word "systematic" has also been suggested to mean "within a library
system." Library systems have been in existence for many years ; public library
systems in cities or in counties or multiple special libraries within a corporation
or within a government agency. In more recent years, the concept of broader
library systems (regional or statewide) has grown. Such .systems have many
other meaningful functions other than the preparation of photocopies so as to
achieve economies in library functions (for example, shared cataloging, the
acquisition of foreign publications or of rare and unusual materials, and the
improved access of all citizens to informational materials of all kinds). Al-
though publisher representatives have made claims that the number of sub-
scribers has been diminished because of the existence of library systems, no
evidence has been presented that any loss of subscription income has occurred.
The above comments regarding § 108 (g) (2) are also applicable to §108 (g) (1) :
(1) is aware or has substantial reason to believe that it is engaging in tlie
related or concerted reproduction or distribution of multiple copies . . .
whether made on one occasion or over a period of time, and [whcthir
intended for aggregate use by one or more individuals or for separate nsc hy
the individual members of a group ; . . .] [Emphasis added.]
If a number of single, isolated, spontaneous requests are received over a pe-
riod of time (italic emphasis above), a library cannot become aware of sucli a
series of events without instituting an extensive and costly system of records of
past transactions.
In the case of multiple copy requests (bracketed italic emphasis above), pay-
ment of a per page copying fee to the publisher may be thought to provide an
equitable solution provided that the costs to libraries for such reporting and
payment mechanisms not be disproportionately great in relation to tlie copying
fees to be paid. However, the two possible mechanisms proposed for payment of
such copying fees completely negate the concept of "fair use" as stated in §107.
The two mechanisms proposed are :
(a) A variable subscription pricing structure with a higher cost to libraries
than to individuals. Thus the library would have paid a fee even if no photo-
copy is requested.
(ft) A transaction fee per page would result in the payment of a fee even for
the first photocopy of an item prepared unless the library were to set up a
costly record keeping operation of all past photocopy requests.
213
Discussions in past years had sug:gested a range of fees from $0.01 to $0.10 per
page. In the immediate past months, publisher representatives at meetings of
the Conference (referred to above) have indicated that they wish to receive
a liigher fee which they will determine individually for each article in each
periodical rather than a per page charge. It must be noted that many photocopy
requests are for only one page or a few pages of an article. Thus, this proposal
also would be unduly costly to libraries and their users.
Should the final result of the proposed legislation be a copying fee payment,
the price level of the copying fee must be subject to determination by legislative
or regulatory action. Otherwise it is conceivable that a publisher might choose
to set the level of a copying fee — ^whether for multiple copies or single copies —
at such a high level that access to some areas of published information could be
effectively prevented.
3.3 Section 108 (h).— The Association feels that there is a real need to dis-
tinguish between two formats of '•musical works" :
{a) Printed musical work.s, and
(&) Sound reproductions of musical works.
To achieve this distinction, we suggest two possible amendments to §108(h) :
(1) Delete the words "a musical work" becau.se performances are in-
cluded in the subsequent phrase, '"or other audio-visual work," or
(2) Add a modifying statement so that § 108(h) will read :
"The rights of reproduction and distribution under this section do not apply
to a musical work other than a printed copy . . ." [Suggested words are
italicized.]
It is important that research workers and students of musicology be allowed
"fair use" access to portions of printed music just as § 108(a) (2) permits "fair
use" access to textual materials. In § 108(h) a clear distinction must be made
between performances or sound recordings and music in printed form.
Jf. Conclusion. — Public libraries have been historically a fundamental develop-
ment by and for the people of the United States. The initiation and growth of
specialized libraries represent a unique development in the United States begin-
ning with the Library of the Carpenters' Company of Philadelphia before the
American Revolution ; and also a concept which has spread throughout the
world.
Whether the main function of a library is public, school, university or special-
ized, all libraries strive to improve and increase ready access by the library'.s
clients to information that will enrich the personal aspirations of the library
users, the quality of our communities (whether urban, suburban or rural), and
the improvement of the economic standards of all segments of our nation's
citizens (minority groups and the disadvantaged as well as the advantaged).
We recognize the imiwrtance of the legislative protection of copyright for
publishers to prevent improper or unfair diversions from their rightful prolits.
We also recognize the importance of copyright protection for creative authors to
prevent diversions from their rightful earnings.
Apparently, publishers feel that their profit patterns will be improved by re-
ceiving photocopying fees. However, the establishment of library photocopying
fees will result in the subsidization of the publishing community at the expense
of all taxpayers. Public libraries and those in tax-supported schools and uni-
versities would have to seek increased public funds annually. Special libraries
in business and industry would have to seek increased budget allotments within
their corporation. As the expenses of a corporation increase, such expenses can
lead only to increased costs to the ultimate consumers of new products or of im-
proved old products.
We ask that the Subcommittee consider the distinction between the photo-
copying practices in and bij libraries on behalf of library users, which we deem
to be proper, and the practices outside of libraries which are improper and
wiiich preempt the legitimate property rights of copyright owners.
Special Libraries Association is grateful to the Subcommittee for the oppor-
tunity to present our views. The Association will be pleased to submit addi-
tional comments if the Subcommittee desires so to assist the Congress in reach-
ing an ultimate and equitable solution to an issue that has values for all
citizens.
214
congeess of the united states,
House of Repeesentatives,
Washington, D.C., October 2, 1915.
Hon. Robert W. Kastenmeieb,
Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of
Justice, Committee on the Judiciary, Rayburn House Office Building, House
of Representatives, Washington, D.C.
Deab Bob: I am concerned over current legislation in your Subcommittee,
H.R. 2223, to revise the copyright law. If Section 108(g) (2) is retained in this
bill, the only major biomedical source library in the State of Alaska will be in
violation of the United States Copyright Law.
The Alaska Health Sciences Information Center serves as the source library
for most of the material required by institutions and over 4,000 health-related
personnel in the entire State of Alaska. This service makes it possible for
doctors, nurses and physician assistants in the most remote Alaskan villages
to receive the information they need to provide optimum health care. Because
of poor communications, lack of transportation and other related problems
common to rural areas in which a small number of people are scattered over
vast distances, community health aides, private practicing physicians, Public
Health Service personnel, hospitals and universities depend heavily upon the
freedom to copy medical journals and texts for use in the bush areas.
Section lOS(g) (2) will affect not only Alaska, but other sparsely populated
areas of the United States as well. I urge you to consider the elimination of
this Section of H.R. 2223, so that the current efforts of Congress to upgrade
existing health facilities in these remote areas of the country will not be
further hindered.
I have received over one hundred letters from physicians, nurses, hospitals,
clinics, universities and state health personnel who protest inclusion of this
Section of the bill. I have chosen a number of letters from each group of health
personnel for your perusal. I request that these letters, as well as my own, be
included in the testimony of the hearings on H.R 2223.
Sincerely,
Don Young,
Congressman for all Alaska.
Alaska Methodist University,
College of Nursing,
August 12, 1975.
Representative Don Young,
U.S. House of Representatives,
Washington D.C.
Dear Representative Don Young : I am writing to express opposition to the
section on photocopying in H.R. 2223, section 108(g) (2) regarding Revision of
the Copyright Law.
Photocopying of books and articles is extremely helpful to both students and
ffsculty. It provides an inexpensive and rapid way to acquire, read and synthe-
size new materials, thus greatly enhancing the quality of education in schools
and universities.
Regarding the need of nurses and other health professionals, I feel sure that
you know it is impossible for nurses and health facilities to subscribe to all the
journals they need to keep abreast of the vast volume of current information.
Therefore, I believe that health care of patients in Alaska may be compromised
if the Alaska Health Sciences Information Center is no longer permitted to
photocopy valuable articles for nurses and other health professionals.
Very truly yours,
MoNA Ravin, R.N., MSN,
Instructor Coordinator of R.N. Programs and Outreach.
215
Providence Hospital,
Anchorage, Alaska, July 9, 1913.
Hon. Peter W. Rodino, Jr.,
Chairman, Judiciary Cotnmittee, House of Representatives, Rooin 2462, Rayiurn
House Building, Washington, D.G.
Dear Congressman Rodino : I am writing to express my opposition to HR 2223
(A Bill For the General Revision of the Copyright Law Title 17 of the United
States).
If this takes effect, the effect upon quality medical care nationwide will be
adverse, and in Alaska will be even more significant, due to our relative isolation,
there being no nearby university centers.
To pass this resolution would be a significant step backward in medical care.
Sincerely,
Maurice J. Coyle, M.D.,
Department of Radiology.
Wrangell General Hospital,
Wrangell, Alaska, July 22, 1975.
Hon. Donald Young,
House of Representatives, 1210 Longworth House Office Building,
Washington, B.C.
Dear Congressman Young: I am writing to you regarding HR 2223. (A Bill
for the General Revision of the Copyright Law Title 17 of the United States.)
The passing of this bill would terminate all major medical library services
presently provided by the Alaska Health Sciences Information Center in
Anchorage. This library is the only biomedical source in Alaska and without this
service to help small hospitals like ours, the quality of health care will surely
suffer.
Your help regarding this bill would be greatly appreciated.
Sincerely,
(Mrs.) Emma G. Ivy, R.N.,
Administrator.
The Wisconsin Interlibrary Loan Service,
Madison, Wis., May 6, 1915.
Re Deletion of Section 108(g) (2) of the copyright revision bill (H.R. 2223).
To: Robert W. Kastenmeier (D-Wis.), Chairman, Subcommittee on Courts, Civil
Liberties, and the Administration of Justice.
From : Nancy H. Marshall, Director of WILS.
As one of your constituents, I have always been grateful for your support
of libraries and federal library programs, including your recent positive vote
on the Roybal-Obey-Stokes amendment to the Education Appropriations Bill
(HR5901).
I have written to you several times in the past on what I believed to be im-
portant issues and was gratified that you, also, shared my concerns. The issue
in question is of such immediate importance that as a citizen of Madison, Wis-
consin, and the nation, as well as a librarian, I must speak out.
Your concern over the past fifteen years or more with copyright revision makes
you a recognized expert in Congress on this complex issue. You have heard the
pros and cons and have had before you voluminous written arguments and
testimony, with more to come. HR 2223 is a "good" bill, much needed and long
overdue. My concern, however, is whether it is the intent of the Congress to
severely limit or restrict altogether the public's access to library and information
resources via library photocopying. I cannot believe this is the intent of the
public's elected representatives. The nation's library collections are one of its
greatest resources, and libraries maintain as a constant goal the voidest possible
access to those collections by the nation's citizens.
Although I am aware of the fact that national library organizations, and the
publishing industry will be giving testimony to the Subcommittee on May 14, I
am deeply concerned that the interests of the consumers of library and informa-
tion resources be represented. Too often the user is overshadowed and not heard
and remains the silent majority, even though s/he is the ultimate recipient for
good or ill in many legislative actions. Thus, it may be in this case, and on
behalf of the users I submit the following for your consideration.
216
Specifically, my greatest concern is with the language of Section 108(g) (2) of
HR 2223. This Section prohibits ". . . systematic reproduction or distribution
of single or multiple copies or phonorecords of material . . ." by libraries. Section
107 appears to appropriately define "fair use", an historical privilege of libraries,
and then effectively snatches it away under 108 (g) (2).
Of particular concern is the fact that systematic reproduction is not defined,
and is, therefore, dangerously ambiguous, but if retained in the Bill could be
interpreted to effectively discontinue the traditional right of libraries of making
a single copy of a copyrighted journal for a single user, even when the number
of users and the volume of single copies is substantial. Again, I cannot believe
that the Congress wishes to deny, under the new copyright revision, this his-
torically proper access to library resources.
On behalf of the Wisconsin Interlibrary Loan Service, its member libraries
and, most importantly, its patrons, I urge the Subcommittee to delete Section
108(g) (2) from the Bill. As the Director of the WILS Network, which serves
all of the citizens of the state of Wisconsin in providing access to library materials
for research and other educational purposes, it is inconceivable that this access
will be cut off and that the taxpayers of this state will be prohibited from
obtaining materials by photocopy, materials which their tax dollars have been
instrumental in purchasing. Wisconsin is not alone in this concern. It is im-
portant to note, also, that the National Cktmmission on Libraries and Information
Science, in its final draft issued on March 10, 1975, restates its philosophy of
greater, not less, access to library and information resources by all the citizens
of the United States.
I have witnessed your concern for the citizens of Wisconsin and the nation,
and the concern of the other respected members of the Subcommittee for their
constituencies. Because of your collective past commitments, I respectfully
request that you give serious consideration to the deletion of Section 108(g) (2)
when you report HR 2223 out of committee.
Mr. Danielson. First of all, I will call Mr. Irwin Karp, who
is counsel for the Authors League of America, Inc. You gentlemen
make yourselves comfortable, and ladies. I note you are all here
together, which is fine.
Our little schedule calls for Mr. Karp first, then Mr. Lieb, Dr.
Cairns, and Mr. Hoopes. Mr. Karp, it's yours for 7 minutes.
TESTIMONY OF IRWIN KARP, COUNSEL FOR THE AUTHORS
LEAGUE OF AMERICA, INC.
jNIr. Karp. Thank you, Mr. Chairman. My prepared statement re-
flects that we are here by prearrangement at the table together. Unlike
the librarians I am not one to say that publishers are my best friends
because I represent professional authors, and publishers are not our
best friends ; and that's true of librarians, too.
I would like to introduce Dr. Robert Cairns — on my right — execu-
tive director of the American Chemical Society. On my left, Mr.
Charles Lieb. counsel, and Mr. Townsend Hoopes, president of the
Association of American Publishers. They will discuss the issue of
library photocopying in relation to sections 107 and 108 of the bill.
Let me set, if T may, the stage for their discussions. The Xerox and
other reprographic machines have established a new method of
reprint publisliing sometimes called "on-demand publishing," "one-
at-a-time reprinting," or "single-copying." Perhaps it's most starkly
reflected in the statement of the Special Libraries Association, which
wants to increase the library copying exemption to cover the "re-
printer" and "republisher," and they are correct in characterizing
libraries as such. This is a new medium for disseminating articles,
chapters from books, or entire works for individual users by reproduc-
217
ins; a single reprint to fill each order, as it is received. One-at-a-time
reprinting is well established, it has been used for several 3^ears by
reprint publishers such as University Microfilms to supply books,
journals, articles, and doctoral theses to individual customers.
Here, for example, is a copy of a 429-page book, entitled Teaching
Primary Eeading, produced on a Xerox Copy-flo machine by Uni-
versity Microfilms. The label reads, "Published on demand by Univer-
sity Microfilms," and that means very simply that each time an
order is received for this book, one copy is reproduced separately on
that machine to fill that order. I would like to leave a copy with the
committee.
Mr. Danielson. Without objection, we will accept it in our files,
though it will not be included in the record.
^Ir. Karp. I understand that.
Mr. Danielson. We don't want to be violating any rules on printing
copies. [Laughter.]
Mr. Karp. We are prepared to secure a license for you to use the
book. [Laughter.]
In fact, that is one of the points. This book was produced under
a license granted by the author and publisher. I know it because
I approved the license, which is on a simple form, for a client of mine
whose late husband wrote the book, and a royalty is x^aid each time one
copy of that book is produced.
The process of one-at-a-time reproduction also is used to reproduce
journa,l articles; and here is, for example, a journal article that was
produced by the Xerox Corp., by permission of the copyright owner.
I would like to leave that, too, not to include in the record, but for
study by the committee.
]Mr. Danielson. I want to point out, I do appreciate having the
material so that we know what you are talking about.
Mr. IvAPtP. And last, to complete the demonstrative evidence, this
volume — which is quite heavy — covers a listing of 10,000 separate
journals which are placed on microfilm by the Xerox Corp. under
license from the copyright owner, within the system of copyright, and
sold to libraries. From those microfilms are produced copies like this
(indicating). We are not talking about the old-fashioned 50-cents-a-
page photostat, as you pointed out in your question; we are talking
aljout new technology, and methods of reproducing copyrighted ma-
terials that are still in various stages of technological development.
I have one more item, this is called a microfiche card. This is even
more sophisticated, and at the same time more simple to use, and much
less costly, than microfilm. From this little card a library can repro-
duce copies of pages of an article in this form (indicating). I will
leave this for the committee's study as well.
The process of one-at-a-time reproduction is employed by several
libraries, some of which serve as reprint centers for the patrons of other
libraries, as well as their own users. There have been studies which indi-
cate that at the present time American libraries may be filling as many
as 7 or 8 million requests a year for this type of copying. And we would
like to, at the conclusion of this hearing, submit to you a compendium
of reports, as well as statements directed to the specific proposals of
the American Library Association, which unfortunately were not
available to us in advance to respond to as concretely as we would have
liked.
57-786— 76— pt. 1 15
218
Mr. Danielson. Without objection, we will receive your referred
to comments.
Mr. Karp. Much of this library-copying activity is devoted to
articles from essential, copyrighted scientific and technical journals.
Copies produced of these on demand of individual readers are given
to them in lieu of the journal itself, which is published to serve this
very audience. In Williams & Wilkins the chief judge in the Court of
Claims pointed this out in his three-man dissenting opinion, support-
ing the opinion of the trial judge. Actually, if you add up the figures
you have a complete Mexican standoff, you have four Court of Claims
judges going one way, and four the other.
Mr. Danielson. That's what we call a congressional standoff, and
when you have that, nothing passes.
Mr. Karp. He pointed out the argument that damage was not
proven was utterly without basis in the record because the majority
hadn't disproved the damages, they simply ignored the trial judge '^s
findings.
The chief judge also pointed out in his opinion that the National
Institutes of Health at the present time purchased only two subscrip-
tions to the plaintiff's journals, and if nothing else, it certainly needs
more than the two copies to meet the requests of the large in-house
staff. And that the whole purpose of what everybody really concedes
was wholesale systematic reprinting, was to do away with the neces-
sity of paying for any more subscription copies of these journals. The
literature of the library community is full of predictions of the state
of the future which may resolve itself into a few libraries that in
some instances, for certain types of publications, serve, as what Mr.
]McKenna quite accurately referred to as "reprinters" and "repub-
lishers."
I should point out that librarians' semantics have been a problem
with us throughout this discussion. They like to talk about "inter-
library loans." When they make a copy of something like this (indi-
cating an article) they don't lend it to anybody. At the Government's,
or the local comm.unity's considerable expense — the figures sometimes
estimated at $5 to $12 a copy to do this— do all the work involved.
They produce a copy which is delivered to a patron of their own, or
another library, and it's his, not a loan.
I should at this time clarify — on the top of page 3 I should not over-
look one distinction. I pointed out when University JNIicrofilms re-
produces a copy of copyrighted work it pays a royalty. When the
librarians reproduce it, they do not pay a royalty, and that's the crux
of the issue, reasonable compensation for systematic library repro-
duction.
Most of the examples that Professor Low ^ave you are examples of
"fair use" and that's not what we are quarrelmg about. Fair use is not
paid for, it is not charged for ; that is preserved very clearly in the
revision bill.
As my colleagues will demonstrate, section 108 of this bill also gives
the libraries broad copying privileges that we don't think they had
under the present law. Moreover, authors and publishers do not seek to
halt systematic library reproduction. We simply say tliat reasonable
payment should be made when copying goes to this extent, and that
workable systems can be established.
219
Tlie discussions which have been described to you, on the one hand,
have a wonderful Rashomon flavor. I can't believe I was there,'
when I hear Professor Low and his colleagues describing w^iat trans-
pired. To say that we, any of us, have a position that the mere existence
of a union list of serials in a library system establishes "systematic
copying" is simply not the case. In fact, asked twice, I twice an-
swered that, "No, we were not saying that." We were merely pointing
out the various characteristics of certain library systems in whose op-
erations one of the functions was to eliminate what they euphemistical-
ly called duplication of periodicals. That means, why should all six
or seven libraries subscribe to a journal when one can subscribe and
make copies for the others ?
The uncompensated reproduction, uncompensated reproduction of
copyrighted woi'k is bound to have a damaging effect on American
publishers and authors.
I would just like to talk briefly about the purposes of copyright.
The economic purpose of copyriglit is, in the Supreme Court's quota-
tion— on top of my page 5 — "to give valuable, enforceable riohts to
authors and publishers, to afford greater encouragement to the pro-
duction of literary works of lasti]ig benefit to the world."
And the economic philosophy underlying the copyright clause, as
the Supreme Court explains it "is the conviction that the encourage-
ment of individual efforts by personal gain is the best way to advance
public welfare through the talents of autliors."
Thus, the instrument chosen by tlie Constitution to serve the public
interest — that interest is the securing of ''iterary and scientific works of
lasting value — is an independent, entrepreneurial property-rights
system of writing and publishing. The Copyright Act establishes the
rights which prevent others from depriving authors and publishers
of the fruits of their labor. But, it guarantees no reward at all. The
reward must come, as in any private, profit-motivated operation, from
the income that the author and publisher can derive from the uses
of their books and journals. They have to take the risk that every
entrepreneur does, that the books and journals may fail financially,
although they make a valuable intellectual contribution — and journals
have failed
Mr. Danielson. Let me interrupt just briefly. I don't like to inter-
rupt you, I have practiced law for a long time'^myself, but you've got
to share time here with three more of you gentlemen. If they want you
to speak for them, I'm delighted, but otherwise I am going to have
to let No. 2 go ahead.
Mr. Karp. I'm at the end of my statement.
]Mr. Danielson. With the permission of Mv. Pattison we will hear
from all the witnesses, and then commence with the questioning;
thereby we will enhance the opportunity to hear you.
Mr. Karp. I simply want to conclude with the statement, Mr. Daniel-
son, that we urge Congress not to disrupt the delicate balance of this
system. ^Nlany compromises have been made by us already in order tO'
accommodate librarians. We don't think any more are possible with-
out inflicting very serious damage on those who create those journals.
I have also included in my statement responses to Professor Low's-
almost ritualistic attack on copyright, It is not a monopoly, not a
special privilege: it doesn't restrict the dissemination of informa-
220
tion. I submit to you the only provision in the U.S. Constitution which
implements the freedoms of the first amendment is the copyright law
because that is the only provision that establishes a legal, economic
foundation under which people can actually go about exercising those
rights, by setting up publishing enterprises, or engaging in writing.
Destroy the copyright clause — and the librarians are asking for
partial destruction — and you are also threatening seriously that private
enterprise system of exercising freedom of expression.
Thank you.
[The prepared statement of Irwin Karp follows :]
Statement of Irwin Karp, Counsel, The Authors League of America
Mr. Chairman, my name is Irwin Karp. I am counsel for The Authors League
of America, the national society of professional writers and dramatists. I
would like to introduce Dr. Robert W. Cairns, Executive Director of The
American Chemical Society ; and Mr. Townsend Hoopes and Mr. Charles Lieb,
President and Copyright Counsel of the Association of American Publishers,
They will discuss sections 107 and 108 of the Copyright Revision Bill and
the issue of "library photocopying".
The Xerox and other reprographic machines have established a new method
of reprint publishing sometimes called "on-demand publishing," "one-at-a-time
reprinting", or "single-copying" (the blander phrase favored by library si)okes-
meu). However labelled, the process disseminates articles, chapters from books
or entire works to individual users — by reproducing a single reprint to fill
each order, as it is received. Each copy, made by Xerox or other machine, is
an exact reprint of the original — letter by letter, line by line as initially set in
type. One-at-a-time reprinting is well established. It has been used for several
years by reprint publishers such as University Microfilms to supply books,
journals, articles and doctoral theses to individual customers, "on demand".
Here, for example, is a copy of a 429 page book, entitled Teacliing Primary
Reading, produced on a Xerox Copy-flo machine by University Microfilms, The
label reads "Published on demand from University Microfilms." — ^i.e., when
an order is received, one copy is reproduced separately on the Xerox machine
to fill it.
The process of one-at-a-time reproduction is employed by several libraries
to make copies of journal articles or portions of books ; some of these institutions
serve as reprint centers for patrons of other libraries as well as their own
users. Much of this activity is devoted to articles from essential, copyrighted
scientific and technical journals, many of which have modest circulations and
are published by nonprofit learned societies. Copies of these articles, produced
on demand of individual readers, are given to tJiem in lieu of lending the journal,
which is published to serve this very audience. My colleagues will explain the
serious injury to publishers from this uncompensated, systematic reproduction ;
and from its increasing use by groups and networks of libraries, in which one
institution reproduces copies of articles from journals it subscribes to, for
patrons of other libraries which do not subscribe to them.
With one-at-a-time reproduction ("single-copying", in library parlance), a
library could make many copies of the same article or work. It produces a "single"
copy for each order ; but it produces as many copies of the article as there are
orders for it. Under the exemption previously sought by library organizations
in the Senate, any library could thus make many copies of the same article, so
long as it produced one copy per order. (In the peculiar semantics of library
organizations, copies produced for patrons of other libraries are called "inter-
library loans." Actually, no "loan" is made. The copy is delivered to the patron
and becomes his property.
There is one significant difference I should not overlook. When University
Microfilms reproduces a single copy of a copyrighted work, it pays the owner a
Yoyalty — liaving previously obtained a license. However, libraries claim, and
demand Congress give them, the privilege of systematically reproducing copy-
righted journal articles and other works without payment of compensation.
[As this Committee and the Copyright Office have stressed, the copyright owner's
right to reproduce copies of his work is not subject to a "non-profit" exemption].
Reasonable compensation for systematic library reproduction is the real
221
issue. Library photocopying which is "fair use" (Sec. 107) does not require
payment. And as my colleagues will explain, Sees. 108 (d) and (e) give libraries
broad copying privileges, without charge. Moreover, authors and publishers do
not seek to halt systematic library reproduction, i.e. that which exceeds
these sections. They are willing to authorize such uses. But they believe that
when libraries systematically reproduce copyrighted articles or other works,
reasonable compensation should be paid, as Sec. 108(g) contemplates. They
also believe that "workable clearance and licensing conditions" can be developed
mutually by librarians and copyright owners, the solution prescribed by this
Committee. My colleagues will relate the continuing efforts to accomplish that
result. It is a result that must be achieved. For imcompensated systematic
reproduction of copyrighted works by libraries will inflict heavy damage on
publishers of scientific and technical journals, authors (see App. I) and other
publishers ; on the copyright system ; and on the public interest it was designed
to serve.
THE PURPOSES OF COPYKIGHT
The library photocopying issue should be considered in the appropriate con-
text— in the context of copyright's constitutional purposes and the manner in
which it was designed to serve the public interest. I will address that subject
before Mr. Lieb, Dr. Cairns and Mr. Hoopes speak to the specific photocopying
issues.
As the Supreme Court has explained, the Copyright Clause of the Constitution
was intended to establish independent, entrepreneurial, self-sustaining author-
ship and publishing as the means of serving the public interest in securing the
production of valuable literary and scientific works. In so doing, the Copyright
Clause serves a second purpose — it implements the First Amendment's freedoms
to express and publish ideas, information, opinions and all manner of literary,
scientific and artistic works. The First Amendment protects against restraints on
these freedoms. But the Copyright Clause is the only constitutional provision
which establishes a legal-economic foundation for exercising them. The Copy-
right Clause thus frees authors from the need for subsidization by the state or
other powerful, institutional "patrons", and from the restraints such support
often imposes. And it was intended to sustain the existence of a diversity of
independent publishers, who would give a wide range of viewpoints access to the
market place of ideas.
THE
The Supreme Court has emphasized that the Copyright Clause of the Con-
stitution
"was intended to grant valuable, enforceable rights to authors, publishers, etc.
without burdensome requirements ; 'to afford greater encouragement to the pro-
duction of literary [or artistic] works of lasting benefit to the world.' "
The Court said that the "economic philosophy" underlying the Copyright Clause
"is the conviction that the encouragement of individual efforts by personal gain
is the best way to advance public welfare through the talents of authors . . ."
{Mazer v. Stein, 347 U.S. 201, 219)
Thus, the instrument chosen by the Constitution to serve the public interest^
i.e., the securing of literary and scientific works of lasting value — is an inde-
pendent, entrepreneurial property-rights system of writing and publishing. The
Copyright Act establishes the rights which prevent others from depriving authors
and publishers of the fruits of their labor. But it does not guarantee a fair
reward, or any reward. For authors and publishers, both commercial and non-
profit, must depend on income derived from uses of their books and journals to
compensate for the talent, labor and money expended in creating them, and pro-
vide working capital for further publications. And as entrepreneurs, they must
assume the ever-present risk that books and journals produced by substantial
labor and cash outlays will fail financially although they make valuable intel-
lectual contributions to the public interest.
We urge that Congress should not disrupt the delicate balance of this essential
system. Carving exemptions out of the "enforceable rights" of authors and pub-
lishers does not serve the public interest. For although the resulting uncompen-
sated uses may further the convenience or ambitious plans of some "user" group,
222
they diminish or destroy the ability of authors and publishers to serve the ulti-
mate public interest — to continue producing new works of lasting benefit. The
publication of scientific and technical journals, for example, richly serves the
public interest — but it is at best a marginal economic operation. Learned societies
and others who publish them do not grow fat on their profits. Squeezed by ever-
increasing costs and static circulations, publishers will be forced to close down
some journals or not start new ones if they are denied reasonable compensation
for uses of their articles in the new medium of systematic, library one-at-a-time
reproduction. Periodicals and journals are neither immortal nor immune from the
laws of economics. The process of attrition may not be apparent to library spokes-
men, but it is nonetheless inevitable. Yet, while they are willing to make substan-
tial payments to the Xerox Corporation, suppliers and library employees to pro-
vide users with hundreds of thousands of copies of copyrighted articles, they
•demand of Congress the privilege of denying the journal's publishers any com-
pensation. [Ironically, libraries jiay the Xerox Corporation a per-page fee — a
royalty, if you will — for each page of each article they reproduce].
THE ANTI-COPYEIGHT ARGUMENTS
It has become ritual for library organization and Ad Hoc Committee spokes-
men to accompany their demands for new exemptions with a series of attacks on
copyright, calculated to suggest that the author has no legitimate claim to rea-
sonable protection for the work he creates.
THE "antitrust ARGUMENT"
Library and Ad Hoc Committee spokesmen charge that a copyright is a "monop-
oly", suggesting it offends the Sherman Act. This is not so. The copyright in a book
is not a "monopoly" in the antitrust sense. It does not give the author control
over the market in books, or tlie business of publishing them. His book must com-
pete in the market place with the 40,000 other titles published that year and the
hundreds of thousands still in print from prior years, including many that deal
with the same subject. His copyriglit only gives him certain rights to use the
book he created. The owner of a copyright only has a "monopoly" in the innocuous
sense that all property owners do — each owns a collection of rights, granted by
law, to use that which he has created, purchased or inherited.
THE "restraint OP INFORMATION" ARGUMENT
Library and Ad Hoc Committee spokesmen charge that a copyright places a
restraint on infonuation. This is not so. A patent prevents others from using the
ideas it protects. A copyright does not impose such restraints. Anyone is free to
use the ideas, facts or information presented in a copyrighted book or article. The
copyright only protects the author's expression, not the ideas, facts or infor-
mation. Other writers can draw on them. Other writers are free to independently
create similar (indeed closely similar) woi-ks; the copyright only prevents sub-
stantial copying of the author's expression.
In Progress and Poverty, Henry George made this trenchant observation about
copyright :
"Copyright . . . does not prevent any one from using for himself the facts, the
knowledge, the laws or combinations for a similar production, but only from using
the identical form of the particular book or other production — the actual labor
which has in short been expended in producing it. It rests therefore upon the
natural, moral right of each one to enjoy the products of his own exertion, and
involves no interference Avith the similar right of any one else to do likewise . . ."
The Copyright is therefore in accordance with the moral law — (p. 411)
THE "MERE PRIVILEGE" ARGUMENT
To Library and Ad Hoc Committee spokesmen, it smacks of immorality to sug-
gest that the author has a moral claim to copyright protection in a work that he
created, that would not have existed but for his talent, labor and creative efforts.
They charge that copyright is not "property" because the rights are created by
statute, and that Congress is not required to pass copyright laws since Art. I, Sec. 8
"merely" says that it "shall have the power" to do so. But the phrase "Congress
shall have the power" does not precede the copyright clause of Sec. 8 — it prefaces
the enumeration of all powers granted to Congress, including the powers to collect
223
taxes, borrow money, raise armies and regulate commerce. Obviously Sec. 8 in-
tended that Congress would enact copyright laws as well as exercise these other
vital functions.
Of course a copyright is property. Like all other property, it is "a creature and
creation of law . . ." (73 C.J.S. Sec. 1, p. 145). Like all property, it is a bundle of
rights granted by the state, through legislation or court decision Copyright is
hardly the only form of property created by statute. Property rights in billions of
dollars worth of land, minerals and other natural resources have been created by
acts of Congress.
But there is one basic distinction. These other statutes grant individuals per-
petual, exclusive rights in resources that belonged to the Nation ; they take prop-
erty from the public domain and give it to private citizens. The Copyright Act
grants the author rights in something he created and that already belonged to him
at common law ; and within a short time, the Act takes his creation from him or
his heirs and places it in the public domain. Henry George was right in saying
the author's claim to adequate copyright protection rests on "natural, moral
right". The common law recognized that right, holding that an author "has an
absolute property right in his production which he could not be deprived of so
long as it remained unpublished, nor could he be compelled to publish it." (Ferris
v. Frohman). And as the Register noted, these exclusive common law rights "con-
tinue with no limit even though the work is used commercially and widely
disseminated."
Library and Ad Hoc Committee spokesmen have not asked Congress to grant
them an exemption from the property rights of the Xerox Corporation which
would permit them to use its machines without charge to reproduce "single copies"
of journal articles or other copyrighted works. Property rights in machinery is
something that appai-ently wins their respect. But the copyright owner's right to
compensation for systematic library reproduction stands on equally firm moral
and legal footing. And his contribution to the libraries' copying operations is indis-
pensable. Unless the American Chemical Society and other publishers can afford
to continue producing their journals, the Xei-ox machines and libraries will not
have articles to reproduce.
"WORKABLE CLEARANCE AND LICENSING CONDITIONS" CAN BE ESTABLISHED
The Xerox machine, oue-at-a-time reprinting and other reprographic processes
are not the first technological changes to confront authors, publishers and the
copyright system. Motion pictures, radio, long-^playing records, television, and the
inexpensive mass-market paperback book all produced enormous transformations
in disseminating copyrighted works. Some new media destroyed prior ones. Others,
such as the mass-market paperback, reached millions who do not use its still-
surviving predecessor, the traditional "hard-cover" book. Motion pictures, radio
and television were not even mentioned in the 1909 Act. Yet it has protected the
rights of authors and publishers to these new uses, and they are entitled to receive
compensation when their works are reproduced or disseminated in these recently
ari'ived media.
Moreover, the concept of copyright has enabled authors and publishers, and
usei-s, to evolve workable licensing arrangements. "Workable clearance and licens-
ing conditions" also can be established for systematic library photocopying,
through the joint efforts of librarians and copyright owners. But that solution
will be aborted if Congress revises Sec. 108 to deprive authors and publishers of
the right to compensation when libraries systematically reproduce copies of jour-
nal articles and other copyrighted works. Destruction of that right would be
totally unfair to those who produce these works ; it would frustrate the purpose
of the copyright clause : and it soon would be harmful to the public interest and
to those very patrons the libraries wish to serve by systematic reproduction.
APPENDIX I
Uncompensated systematic library reproduction would also damage authors of
poetry, fiction, and books and articles on political and social problems, biography,
history and a wide range of other subjects. After these works first appear in a book
224
or periodical, they are often reprinted — with tlie author's permission — in an-
thologies, text books, periodicals, collections of the author's work, etc.
Many authors earn a substantial part of their income from such reprinting of
their works. Indeed, many earn the major part of their compensation in this man-
ner. Poets, essayists and short story writers, for example, receive very little when
a work is first published in a hard-cover book or periodical. But over the years
that follow, they may license several different publishers to reprint the poem,
short story or essay in anthologies or collections or textbooks. Although each fee
is small, the accumulation of fees produces a modest compensation for work oi
substantial literary and educational value. As testimony before your Subcommit-
tee indicated, many of these writers earn from 50% to 75% of their income from
these reprint fees.
Authors of books also earn a significant part of their compensation, in many
instances, from authorizing the reprinting of portions of a work— of similar size
to periodical articles — in anthologies, textbooks and other collections. Testifying
before the Senate Subcommittee, John Dos Passos noted that a considerable part
of his income from writing, in recent yeai's, consisted of royalties from licenses to
reprint portions of his books in this way. And the Xerox machine has developed
a new, authorized method of reprinting poetry, articles, etc. Certain reprint puli-
lishers now prepare customized anthologies, on demand, for college and univerr-iity
classes. Articles or other works are selected by the professor, the reprint pxiblisher
obtains permission from the copyriglit owupr, and produces just enough copies of
each piece, bound together, to serve the needs of the class or classes. Royalties are
paid to the author.
If libraries — including college and university librarie"=! — were given the power
to systematically reproduce single copies of poems, articles and sections of books
without compensation, authors would be severely damaged. The process of supply-
ing these copies — e.g. one to each student in a college class in litei-ature or political
science — can replace several copies of an anthology or book in the library or sev-
eral copies of a paperback collection or text in the college book store. It is not
necessary for the copies to be bound, so long as they are provided, they replace the
authorized copies for which the author woukl have been paid — the anthology, cus-
tomized anthology, textbook, etc. Unless authors are compensated for uses of their
works by audiences reached by the medium of systematic library one-at-a-time
reprinting, they will be deprived of a substantial part of their income.
Various reports have documented the enormous increase in imautliorized sys-
tematic library one-at-a-time reprinting of journal articles and other copyrighted
works (e.g. the Sophar & Heilprin Report for Office of Education, in 1987).
And it is common knowledge that the amount of copying in large libraries, library
groups and networks, and in university and coMege libraries has incrpased tremen-
dously since the report made by Sophar and Heilprin 9 years ago. Moreover, the
provisions of the Revision Bill must deal Mitli the amount of such copying that
will occur next year, 10 years from now, and 20 years from now.
Library spokesmen could hardly guarantee that an exemption permitting thpm
to engage in systematic reproduction would not seriously injure authors, journal
publishers and other publishers. Furthermore, an exemption for systematic library
reproduction could not draw a line — specifying that if an author or publisher
suffered a prescribpd degree of injury from library reproduction of his articV';,
poems or stories, libraries must cease one-at-a-time reprinting of his works. The
only rational solution is that proposed by this Subcommittee, workable licensing
arrangements which would provide authorization for libraries to copy, and pro-
vide reasonable compensation for authors and publishers.
In the light of copyright history, it would be dangerous to assume that uncom-
pensated systematic library reproduction will not inflict substantial damagp.
Starting with the phonograph record, every new process of dissemination has
been greeted with the same "it's not a threat" attitude the library spokesmen have
expressed toward systematic one-at-a-tinip rpprinting. Had authors been deprived
of compensation for uses of their works in motion pictures, radio, television and
mass-market paperbacks, few could today earn any reasonable compensation from
their writing.
It should be emphasized that library reproduction of articles is not "note tak-
ing" or a substitute for copying by individual readers. Persons who obtain copies
of articles from a library or publisher are not receiving handwritten notes — ■
they are acquiring reprints of printed articles or other work.s, several pages long —
just as they buy or acquire other printed materials to avoid the dozens of hours it
would take to copy that much by hand. Each copy costs money to produce. Nor
could users reproduce the copies themselves. Many patronize libraries that do not
225
have the journals. The copies are reproduced for them in libraries dozens or
hundreds of miles away. And where the user's library subscribes to the journal,
it will produce and give him a reprint of the article he wants, rather than lend
the journal — so that it can keep the journal itself available to reproduce copies of
articles for other patrons, and avoid losing this reprint master through wear and
tear, a user's negligence or theft.
Mr Danielson. INIr. Lieb, counsel for the Association of American
Publishers.
TESTIMONY OF CHAHLES H. LIEB, COUNSEL FOE THE ASSOCIATION
OP AMERICAN PUBLISHERS
Mr. Lieb. I would like to preface the reading of excerpts from my
statement to remark that, judging from the testimony this morning
from our friends representing the libraries, I think that today, sadly,
we are further from a reasonable compromise on the photocopying
problem than we have been for the last 4 or 5 years.
Today, for the first time in recent years the libraries say that they
oppose the provision against multiple copying, a section with which
thev have been in agreement since it appeared in the 1969 Senate bill.
Today, also, for the first time they say they want the elimination of
the inhibition against reproduction of audiovisual, musical, and other
materials.
Similarly, for the first time in recent years this kind of hard-line
position is taken not by some but by all the libraries, and that is a
regressive, not a compromising position.
They say today in answer to the question that was asked them
about damage to the publishers, that they don't think the publishers
are being damaged. The publishers, of course, have no way of knowing
how much library copying is being done, but their own operating
statements tell them that their results are not what they expected.
But, Mr. Anthony Ottinger from Harvard Universitv, from which
my friend, Mr. Sharaf, operates as well, submitted on February 26 of
this year a report under contract of the National Commission on
Libraries and Information Sciences, a report entitled "Elements of
Information Resources Policy," which had this to say, at page 105 :
The practice of photocopying by interlibrary loans adds another dimension to
the problem. Sisznificant proportions of interlibrary loans are met by what are
called non-returnable items. Unfortunately trend data on this score are not
available. Data on this .score disappear altogether from the 19fi9 report on
library statistics of colleges and universities, and reappear in the 1971 data only
by number of participating institutions, without transaction volume being
given.
And Professor Ottinger from Harvard finishes this paragraph with
the following, "It is hard to avoid the suspicion that these important
data were suppressed as sensitive intelligence in the war over the
Convright Revision Bill."
The position of the Publishers Association in brief is that we sup-
port the provisions of section 107 of H.R. 222o with respect to fair use
and we support the pT-ovisions of section 108 Cf) (8) , which make clear
that libraries are entitled to the benefit of this doctrine. We support,
also, the additional copying pi-ivileges extended to libraries in section
108, but we are opposed to any further limitations on the rights of
authors and other copyright owners; and we are opposed in particular
to the elimination of what we thought was being challenged today
228
namely, the section with respect to systematic copying. And we are also
opposed to modification of what we learned this morning is being
challenged, namely the preceding subsection, which inhibits multiple
copying.
Much of the copying that Professor Low spoke about this morning,
his poor boy in Arkansas who wants to copy a page, is permitted
under the principles of fair use. In addition, much duplication over
and above these permissible limits would be permitted under lOS. And
the American Library Association's Subcommittee on Copyright, of
which Professor Low, I believe, was chairman, was more candid in its
committee report wliich was submitted last July to the Library
Association than, I think, he was with you this morning.
He said in that report — and I'm quoting — "We now have provisions
under section 108 permitting photocopying of archival material;
copying for preservation; freedom of liability for copying done by
users on coin-operated machines on library premises, and the highly
important provision permitting the making of single copies for normal
interlibrary loan work."
"On the other hand," the report continues, "we have not been able
as yet to reach agreement on 'systematic copying' a term used to de-
scribe copying in a system or network where one library agrees to dis-
continue its subscription to a journal and depend on another library in
the network to make photocopies of articles from this journal when
needed."
"Copyright proprietors, rightly or wrongly, believe that such sys-
tems or networks constitute a potential threat to their rights and want
to prohibit such copying without license. We, of course, would like to
see as few restrictions as possible,"
Agreement has not been reached on systematic copying. It has not
been reached, because the libraries, as Professor Low intimated to you
this morning, walked away three times from us — and Mr. Hoopes
will elaborate on that — in our efforts to put flesh on a statutory
design which by a series of guidelines would establish what kind of
copying is permissible, and wliat is not permissible.
We stand ready to work out agreements with respect to these
guidelines. We stand ready to establish a clearance and payment
system at our expense — not the libraries'. But so far the libraries have
not been forthcoming in this regard.
Mr. DANiELSOisr. Well, you actually have a minute left. [Laughter].
Mr. LiEB. My friend was rushing me. I think he'd rather hear from
Dr. Cairns. I will yield to him. Thank you.
[The prepared statement of Charles H. Lieb follows :]
Statement of Charles H. Lieb, Copyright Counsel for the Association
OF American Publishers, Inc.
I am Charles H. Lieb. I am a member of the law firm of Paskus, Gordon and
Hyman of New York City. I appear in behalf of the Association of American
Publishers, Inc. for whom I am copyright counsel. Appearing with me are
Townsend Hoopes, President of the Association, from whom you will hear later ;
Alexander C. Hoffman of Doubleday and Company, Inc., who is chairman of the
Association's Copyright Committee; and Susan Engelhart, the Association's
staff director for copyright.
The Association of American Publishers is a trade association of book pub-
lishers in the United States. Its 265 member companies and subsidiaries are
believed to produce 85 per cent or more of the dollar volume of books published
227
in the United States. Among its members are publishers of scientific and tech-
nical journals ; some of its members are religious or educational not-for-profit
organizations. We are grateful for the opportunity to testify at the hearing
today which, we understand, is limited to the issue of library photocopying, and
we request permission to file at a later date our formal statement as part of the
record of today's proceedings.
The following, in brief, is our position :
1. We believe that section 107 of H.R. 2223 is a helpful statement of the
principles of fair use. and we support section 108(f) (3) which makes it clear
that libraries receive the benefit of that doctrine.
2. Although in some respects harmful to the interests of copyright proprietors,
we support the copying privileges extended to libraries by Section 108.
3. We are opposed, however, to any further limitations on the rights of authors
and other copyright owners, and we are opposed in particular to the eliminatioti
of section lOS(g) (2) with respect to "systematic copying.'
Much of the copying done by libraries would be permitted under the prin-
ciples of fair use which would be clarified by Section 107. In addition, much
library duplication over and above the permissible limits of fair use would be
permitted under the provisions of section 108. This freedom to conduct normal
library operations was candidly described in a July 1974 report of the American
Library Association copyright subcommittee, a copy of which we offer as an
exhibit. It reads in part :
"We now have provisions [under Sec. 108] permitting photocopying of
archival material, copying of material for preservation, freedom of liability for
copying done by users on coin-operated machines on library premises, and the
highly important provision permitting the making of single copies for normal
interlibrary loan work. [Underscoring and bracketed material supplied.] On the
other hand, we have not been able as yet to reach agreement on "systematic
copying," a term used to describe copying in a system or network where one
library agrees to discontinue its subscription to a journal and depend on another
library in the network to supply photocopies of articles from this journal when
needed. Copyright proprietors, rightly or wrongly, believe such systems or net-
works constitute a potential threat to their rights and want to proliibit such
copying by them without some sort of license. We, of course, would like to see
as few restrictions as possible placed on dissemination of information through
cooperative effort."
Agreement has not been reached on systematic copying ; instead, librarians
are now urging the elimination of section 108(g) (2) so that they will he free
to make copies not only for normal use but for library system and network
operations as well.
"Systematic copying" as the term is used in section 108 should be distinguished
from copying done pursuant to "isolated single spontaneous requests" such
as takes place in normal library procedures. Systematic copying occurs when
a libi'ary makes copies of materials available to users, either directly or
through other libraries, under formal or informal arrangements "whose pur-
pose or effect" is to have the reproducing library serve as the prime source of such
material. (Senate Report 93-983, 122)
Systematic copying, in other words, substitutes the copying for the original
which otherwise would have been purchased from the publisher. The library
world appears to be divided on whether or not licensing procedures should be
worked out for systematic copying. Some insist that no distinction should be
admitted between unauthorized systematic copying and copying pursuant to
isolated requests, and that payment should be made for neither. Others con-
cede the difference in principle, but say that the kind of copying that should
be paid for is too imprecisely defined in section 108, and that no practicable
procedures have been established by which clearance can be obtained and pay-
ments made.
We think it unnecessary to belabor the point that unauthorized systematic
copying — the kind of copying that is done at a research center, or at a central
resource point for use in a li}>rary network — is the functional equivalent of
piratical reprint publication. Certainly, this kind of copying must be paid for if,
as the National Commission on Libraries and Information Science puts it, "the
economic viability and continuing creativity of authorship and publishing" are
to be protected. ( Synopsis of second draft proposal, June 1974. )
228
It is equally meretricious to complain that the "systematic copying" that is
to be paid for is too imprecisely defined, or that payment cannot be made because
payment systems have not been established.
Section 108(g) excludes from library copying privileges not only "systematic
copying" but also the related or concerted reproduction or distribution of "mul-
tiple" copies. Systematic copying and multiple copying are general concepts ; both
are illustrated by examples in the Senate committee report (which closely follows
the discussion of fair use in your 1967 committee report), and neither is more
Imprecise than many other statutory or common law doctrines with which we
are all familiar. The libraries do not claim an inability to understand the multiple
copying concept; the systematic copying concept is no less viable or under-
standable.
What is missing of course is agreement among the parties to flesh out the
statute — not only to formulate photocopying guidelines for the assistance of
library patrons and employees, but to establish workable clearance and licensing
procedures as well.
This is what your committee recommended in 1967 and this is what the Senate
committee recommended in 1974. Had this been accomplished, we would not be
here today. It has not been accomplished, and Mr. Hoopes in his testimony will
place the blame squarely where it belongs.
Report to the Council of the American Library Association Prom the
Copyright Subcommittee
The Copyright Revision bill, S. 1361, which, due chiefly to the cable TV con-
troversy, has resided in the Senate Judiciary Subcommittee during all of last
year and up to this date in this year, now gives evidence of beginning to move.
The full Senate Judiciary Committee reported it out on July 3 and this last
Monday issued the accompanying Senate Report (S. Rept. 93-983) explaining the
legislative intent in its passage. It will now probably come to the floor of the
Senate and be passed within the next month to six weeks.
We have had many conversations with the members of the Senate Subcommittee
in the past several months about provisions in the bill affecting photocopying in
libraries. We now have provisions permitting photocopying of archival material,
copying of material for preservation, freedom of liability for copying done by
users on coin-operated machines on library premises, and the highly important
provision permitting the making of single copies for normal interlibrary loan
work. On the other hand, we have not been able as yet to reach agreement on
"systematic copying," a term used to describe copying In a system or network
where one library agrees to discontinue its subscription to a journal and depend
on another library in the network to supply photocopies of articles from this
journal when needed. Copyright proprietors, rightly or wrongly, believe siich
systems or networks constitute a potential threat to their rights and want to
proliibit such copying by them without some sort of license. We. of course, would
like to see as few restrictions as possible placed on dissemination of information
through cooperative effort.
In its report, the Judiciary Committee, in an effort to remove this impasse,
recommended that "representatives of authors, book and periodical publishers
and other owners of copyrighted material meet vtith the library community to
formulate photocopying guidelines to assist library patrons and employees."
We believe that such conferences can be promoted best through the office of some
interested but impartial individual and believe that Miss Barbara Ringer, as
Register of Copyrights, would be an ideal person for this. Not only does she have
the confidence of both librarians and publishers in her fairness and impartiality,
but she is also far and away the most experienced of anyone in the country in
the area of both domestic and foreign copyright.
In trying thus to meet the recommendations of the Senate Committee in this
regard and to accomplish what we hope will be of benefit to all, we ask Council
to transmit the following request to the Register of C^opyrights.
The American Library Association urges the Register of Copyrights to arrange
In such ways as deemed feasible and appropriate conferences between representa-
tives of authors and book and periodical piiblishers and of the library community
to resolve so far as possible the different interests in copyright legislation, to
229
Institute studies of related problems, and to promote understanding on the part
of the general public of the many complexities inherent in the copyright problem.
Presented to American Library Association Council, July 12, 1974.
TESTIMONY OP ROBERT W. CAIRNS, EXECUTIVE DIRECTOR,
AMERICAN CHEMICAL SOCIETY
Dr. Cairns. I'm Robert Cairns, and I have a very lengthy state-
ment, which I will obviously not have time to present; I would like
to submit it for the record.
Mr. Danielson. Without objection, it will be received in the record,
I would appreciate it if you would give us a "once over lightly," I am
sure you know the contents.
Dr. Cairns. I will do so. I have a summary, and I'll even have to
summarize the summary.
Mr. Danielson. Fine.
Dr. Cairns. First of all, I would like to introduce my colleagues here,
on my right, Dr. Richard Kenyon, who is director of our division of
communications. And behind me is Dr. Stephen Quigley, who is direc-
tor of our department of chemistry and public affairs, and Mr. William
Butler, representing Mr. Arthur Hanson, general comisel of our
society.
Perhaps the main objective of the American Chemical Society is
the increase and diffusion of chemical knowledge
Mr. Danielson. Your objection ?
Dr. Cairns. Our principal objective.
Mr. Danielson. Thank goodness.
[Laughter.]
Dr. Cairns [continuing]. That lays emphasis on the fact that we
are interested very strongly in the dissemination of scientific knowl-
edge.
Mr. Danielson. That is the only basis under which we can have
a copyright law, as I read the Constitution.
Dr. Cairns. Throughout the past 99 years, the American Chemical
Society approach to achieving this objective has been to gather, to
evaluate, to organize, and to control new scientific information into
a form useful for publication, then to publish journals — 16 in num-
ber, I believe — and deliver it to the scientific world, that is our position.
In providing a record of new scientific knowledge and maintaining
the basis upon which it is gathered, evaluated, and organized for pub-
lication, the journals provide a constantly updated authoritative con-
sensus of universally accepted knowledge in the fields concerned. We
can speak, I think, on this theme for a great many scientific societies,
although we are one of the largest.
The integi-al pait played by scientific journals and scientific re-
search renders them indispensible for our way of life. These jour-
nals provide the knowledge base for technical development, for answers
to urgent problems faced in the United States and the rest of the
world, such as the energy crisis, the world food problem, the delivery
of adequate health service, and pollution abatement.
It is critically important that this system of organizing, evaluatiufr,
and providing scientific infomiation remain healthy, that is our maia
contention.
230
JiTow, the central argument focusing on photocopying is essentially
an economic one. I wish to call your attention particularly to the
critical problem provided by the cost of bringing the research journal
tlirough the process of editing, collecting and evaluation, composition,
and other production steps, up to the point of being ready to print
the first copy. These costs are what we call "first-copy costs." In our
system in making scientific information broadly available is to con-
tinue, we must continue to find ways to support these first-copy costs,
as well as to pay the costs of the journals actually printed and
delivered.
We are finding that subscriptions to our journals are decreasing.
Since 1969, subscriptions have decreased from 12 to 18 percent. For
example, the Journal of the American Chemical Society, which is
our prestige journal, has dropped from almost 20,000 down to a
little below 16,000 subscribers as of the end of 1974.
The Journal of Organic Chemistry has dropped from 10,500 to
9,500 ; the Journal of Physical Chemistry from 6,500 to 5,500 ; others
have declined comparably.
If users are allowed, without paying for the journal, to receive
copies of the journal papers, it is not likely that they will subscribe
to the journal. Under such conditions, paid subscriptions can be
expected to continue to drop rapidly.
While replacement of actual printed copies of the journal by photo-
copies would reduce the cost to the user, the large costs referred to
as "first-copy costs" would remain uncompensated, it would have
to be distributed over a decreasing number of journal subscriptions,
and the result would be very expensive journals. This would mean
that the cost would fall on the relatively small number of individual
organizations which would continue to subscribe to the journal. Ob-
viously, a continuous trend in that direction would threaten the eco-
nomic stability of the journal system.
If, on the other hand, the copyright law is designed to require pay-
ment for photocopying of papers from journals of an adequate and
equitable charge for the copy, this would distribute the cost of the sys-
tem more equitably over those who benefit from it. The objective ig
not to prevent such photocopying, but, rather, to provide support for
the basic costs of developing scientific information for distribution,
thus keeping the journal system viable as a base from which the im-
proving technologies for improved dissemination can draw ; the result
would be a more effective and more lasting total information system.
Mow, there are a couple of studies to which I make reference in
my main report. One, that the interlibrary loan requests — by their
own studies — grew from 859,000 requests in 1965 to double that figure
in 1969, with projections as high as 2.6 million in 1974—75. So, we
are getting up into millions, and millions, and millions of interlibrary
loans, to give you an order of magnitude; and that is from their own
data.
In another study the author discussed service by possibly a national
periodical resources center. They estimated that from the collection
of 10,000 titles the demand will start growing in the range of 58,000
to 75.000 in the 1st year, to a range from 2% to 5 million in the 10th
year. Yet, 90 percent of these would be filled by pliotocopies. These
figures give you some indication of the increase in capacity of the
231
network and system of improving the dissemination of scientific
information.
However, it is reasonable to expect that the number of journal
subscriptions from which those will be provided will be much smaller
than at the present.
There have been objections that any system of licensing or fees
for photocopies would encourage excessive administrative costs. How-
ever, a study of the elements and possible systems for licensing and
collection of fees for photocopies has been developed by a working
group of librarians and publishers of the Conference on the Resolu-
tion of Copyright Issues under the chairmanship of the National
Commission on Libraries and Information Science — plans are now
being developed for testing such proposed systems as a means of
learning just how the process may be carried out in an economically
sound fashion.
I have here Dr. Kenyon who is a member of that working group
and he will be glad to answer specific questions on that system.
Despite reservations on some segments of this bill, the American
Chemical Society recommends passage of the sections of H.R. 2223
related to library photocopying. This recommendation is made with
the belief, based on work with the Conference on the Resolution of
Copyright Issues, that a practicable system for licensing and fee col-
lection for photocopies of copyrighted works can be developed, which
will render fair and equitable charges for systematic photocopying in
the interest of an improved and economically viable system for the dis-
semination of scientific information.
Mr. DANrELSOx. Thank you very much. You have 21^ minutes left.
I'm watching the clock in the back of the room. Would you like to yield
to your associate ?
i)r. Cairns. Yes.
Mr. Danielson. Your name, sir ?
Dr. Kenyon. Richard Kenyon. I would like to make a comment on
the working group of the Conference on the Resolution of Copyright
Issues, which has been mentioned in earlier testimony here. The
w^ork of this group now has been announced in a release by the Library
of Congress, and in our most recent meeting on April 24, we agreed the
documents were public documents. In the interest of providing infor-
mation to the record I would like to offer the report of our working
group for the record.
]Mr. Dantelson. "Without objection we can receive it in our files. I
think we will withhold just how much we want to print in the record
until the staff and members have had a chance to go over it. I do thank
you for making it available, though. [See app. 3.]
Dr. Cairns. I think I can summarize by saying that I think we can
work out a system which is economically viatle, and continue to sup-
port authors, users, editors, and members of the scientific community at
large.
'Slv. Dantelson. Thank you very much, Dr. Cairns.
[The prepared statement of Dr. Robert W. Cairns follows :]
Statement of De. Robeet W. Cairns, Executive Directoe, American Chemical
SOCIETT
Mr. Chairman and members of the Subcommittee: My name is Robert W.
Cairns. I am the Executive Director of the American Chemical Society and, with
the authorization of its Board of Directors, I appear before you today to present
232
the Society's statement. I have spent 37 years in industry and retired as Vice
President of Hercules Incorporated on July 1, 1971, to accept the position of
Deputy Assistant Secretary of Commerce for Science and Technology. I re-
signed from that position on December 1, 1972, on acceptance of my present ap-
pointment. Accompanying me today are Dr. Richard L. Kenyon, Director of the
Public, Professional and International Communication Division, Dr. Stephen T.
Quigley, Director of the Department of Chemistry and Public Affairs, and JMr.
William B. Butler, representing Mr. Arthur B. Hanson, General Counsel of the
Society.
We appreciate being given this opportunity to comment on certain features
of the Copyright Revision Bill, H.R. 2223. The issues addressed by this legislation
are both fundamental to the formulation of national science policy, and of vital
significance with respect to the ability of our Society to resolve many of the prob-.
lems vphich confront it. These issues have been under discussion for some time
now by the Committee on Copyrights of the Board of Directors and Council of the
American Chemical Society, as well as by other similar scientific societies, and a
general consensus on them has been under development. This consensus has been
developed in the context that the protection of copyrighted material will "pro-
mote the Progress of Science and Useful Arts", as specified in Article I, Section
8, Clause S of the Constitution of the United States. The viewpoint which we at-
tempt to express is that of the chemical, scientific and technological commu-
nity, as represented by the American Chemical Society.
The American Chemical Society is incorporated by the Federal Congress as a
non-profit, membership, scientific, educational society composed of chemists and
chemical engineers, and is exempt from the payment of Federal income taxes
under section 501(c) (3) of the Internal Revenue Code of 1954, as amended.
The American Chemical Society consists of more than 107,000 such above
described members. Its Federal Charter was granted by an Act of the Congress
in Public Law 358, 75th Congress, 1st Session, Chapter 762, H.R. 7709, signed
into law by President Franklin D. Roosevelt on August 25, 1937, to become
efl'ective from the first day of January, 1938.
Section 2 of the Act is as follows :
"Sec. 2. That the objects of the incorporation shall be to encourage in the
broadest and most liberal manner the advancement of chemistry in all its
branches ; the promotion of research in chemical science and industry ; the
improvement of the qualifications and usefulness of chemists through high
standards of professional ethics, education, and attainments ; the increase and
diffusion of chemical knowledge; and by its meetings, professional contacts,
reports, papers, discussions, and publications, to promote scientific interests and
inquiry, thereby fostering public welfare and education, aiding the development
of our country's industries, and adding to the material prosperity and happiness
of our people."
Its Federal incorporation replaced a New York State Charter, which had been
effective since November 9, 1877.
One of the principal objects of the Society, as set forth in its Charter, is the
dissemination of chemical knowledge through its publications program. The
budget for the Society for the year 1975 exceeds $39,000,000 of which more than
$30,000,000 is devoted to its publications program.
The Society's publication program now includes three magazines and seven-
teen journals, largely scholarly journals that contain reports of original research
from such fields as medicinal chemistry, biochemistry, and agricultural and food
chemistry, as well as a weekly newsmagazine designed to keep chemists and
chemical engineers abreast of the latest developments affecting their science and
related industries. In addition, the Society is the publisher of Chemical Abstracts,
one of the world's most comprehensive abstracting and indexing services. The
funds to support these publications are derived chiefly from subscriptions.
The journals and other published writings of the Society serve a very im-
portant function, namely : they accomplish the increase and diffusion of chem-
ical knowledge from basic science to applied technology. In so doing, they
must generate revenue, without which the Society could n,ot support and con-
tinue its publications program in furtherance of its Congressional Charter to
sei've the science and technology of chemistry. The protection of copyright has
proved an essential factor in the growth and development of the scientific-.
publishing program of the Society.
The twenty periodical publications of the Society produce more than 40,000
pages a year and subscriptions in 1974 totalled 323,000. Chemical Abstracts
annually produces more than 140,000 pages which go to 5,500 subscribers. Its.
233
abstracts number in excess of 361,000 yearly and its documents indexed in excess
of 425,000. The single greatest source of income for all ACS publications is sub-
scription revenue.
As is indicated by the objectives of the American Chemical Society, we believfr
that the effective dissemination of scientific and technical information is critical
to the development, not only of the society and economy of the U.S.A., but also
of modern society worldwide.
These journals provide the knowledge base for technical development of
answers to urgent problems facing the United States and the rest of the world,
such as the energy crisis, the world food problem, the delivery of adequate-
health services, and pollution abatement. It is critically important that this
system for organizing, evaluating, and providing scientific information remain
healthy.
Scholarly journals are the major instruments for dissemination and recording
of scientific and technical information. These journals are expensive to produce.
If the costs are not supported financially by those who make use of them they
cannot continue. There is no adequate substitute in sight.
The scholarly scientific or technical journal is more than merely a repository
of information. The scientific paper is the block with which is built our under-
standing of the workings of the world around us. In his papers, each scientist
records his important findings for the permanent record. His successors then have
that knowledge precisely recorded and readily available as a base from which
they may start. So the process continues in a step-by-step fashion from scientific
generation to scientific generation, each worker having available to him or her
the totality of the knowledge developed up to that time. Each scientist stands
upon the shoulders of his predecessors.
But this analogy of simple physical structure is inadequate, for at least of
equal importance is the continuous refinement that takes place. Before new
knowledge is added to the record, it is reviewed, criticized and edited by authj)ri-
tative scholars ; then, once published, it is available in the record for continued
use, criticism, and refinement. New findings make possible the revelation of
weaknesses in the earlier arguments and conclusions, so that as the structure
of scientific knowledge is built higher it is also made stronger by the elimination
of flaws. While it has been said that mankind is doomed to repeat its mistakes,
the system of scientific recording in journals is designed to prevent the repetition
of such mistakes and to avoid building upon erroneous conclusions. The scholarly
journal record is the instrument for insuring this refining process.
In addition, journal papers form an important part of the basis upon which a
scientist's standing among his peers is judged. For this reason, scientific scholars
are willing to give their time and effort to help produce these evaluated records
and are also willing to leave the management of the copyright on their papers in
the hands of the scientific societies. These sckolars are rarely concerned with
private income from their published papers, but they are vitally concerned
with the preservation of the intrinsic value of the scientific publishing system.
Publishing costs have risen and are rising continuously, making the con-
tinuation of the scientific-journal system increasingly difficult. This has been
recognized by the U.S. Government in acknowledging the philosophy that
scientific-research work is not complete until its results are published, and in
establishing a policy which makes it proper that money may be used from federal
support of research projects to help to pay the cost of journal publication. It is
this policy which provides most of the funds for paying page charges, charges
originally designed to pay the cost of bringing the research journal through the
editing, composition, and other production steps, up to the point of being ready
to print. However, publishing costs are now so high that these page charges no
longer pay even for these initial parts of the publishing process. American
Chemical Society records in 1974 show that page charges supported one-third or
more of those costs for fewer than 30% of ACS journals.
Publishing costs must be shared by the users. If these users are allowed, with-
out payment to the journal, to make or to receive from others copies of the jour-
nal pajiers they may wish to read, it is not likely they will be willing to pay for
subscriptions to these journals. If and as free photocopying of journals proceeds,
the number of subscribers will shrink, and subscription prices will have to rise.
The reduction of subscription income may continue to the point of financial
destruction of these journals.
57-786— 76— pt. 1 16
234
The problems of the commercial publishers of many good scientific journals
are even more severe, because these publishers do not have the moderate as-
sistance of page charges. , . , ,
The doctrine of fair use, developed judicially but not legislatively, has long
been useful to the scholar, for it has allov^^ed him to make excerpts to a limited
extent for purposes of the files used in his research. However, the modern tech-
nology of reprography has offered such mechanical efficiency and capacity for
copying that it is presently endangering the protection given the foundations
of the scholarly journal by copyright. "Excerpts," instead of being notes, sen-
tences, or paragraphs, are being interpreted to mean full scientific papers, the
aforementioned building blocks.
As the copyrighted journal system developed, it was agreed long ago that the
scholar should be allowed to hand-copy excerpts for use as background informa-
tion. As a further step, authors became accustomed to ordering the reprints of
their papers to send to their colleagues as a means of assuring a good record
of the progress of work in the field concerned. This was followed, 20-80 years
ago. by some minor use of the old "Photostat" machine. While that process
stra'ined a little the proprieties of copyright, it was fairly generally agreed
that the mechanics of the practice were such as to help the research scientist
while difficult and costly enough not to undermine the basic structure of the
journal system.
We hold no objection to a scholar himself occasionally making a single copy
in a non-systematic fashion for use in his own research. However, in the past
decade the techniques of reprography have advanced to such an extent that
third parties, human and mechanical, are beginning to be involved in a sub-
stantial way. It now is practical to build what amounts to a private library
through rapid copying of virtually anything the scholar thinks he might like
to hnve at hand. While this process has obviously personal advantages, it is now
being done extensively and increasingly, without any contribution from these
scholars — or the libraries which copy for them — to the cost of developing and
maintaining the basic information system that makes it possible. Even con-
servative projections of the development of reprographic techniques within the
next decade make it clear that the economic self-destruction of the system within
the next decade is a real possibility. Overly permissive legislation could make
this destruction a certainty.
Use of a journal by an individual for extracting from it with his own hands,
by hand-copying the material specifically needed and directly applicable to hia
research, is one thing. A practice in which an agent, human or mechanical, acts
as copier for an individual or group of individuals wishing to have readily
available, without cost, copies of extensive material more or less directly related
to his or their studies and research, is quite a different matter. The latter is
certainly beyond justification on the mere grounds that technology has made
it convenient, or that the purposes are socially beneficial.
Documented evidence of the increase in photocopying is found in "A Study
of the Characteristics, Costs, and Magnitude of Inter Library Loans in Academic
Libraries," published in 1972 by the Association of Research Libraries. There
we find that in 1969-70 the material from periodicals sent out in response to
requests for "interlibrary loans" filled by the academic libraries surveyed was
S3.2 percent in photocopy form as compared with 15.2 percent in original form
and 1.4 percent in microform.
In that same report the volume of interlibrary loan activities from academic
libraries is traced. It grew from 859,000 requests received by academic lending
libraries in 1965-66 to 1,754,000 in 1969-70. and is projected to reach 2,646.000 in
1974-75,
Much thinking and study are being devoted to systems for improving access
to periodicals resources through networks. These networks would make the
scientific information available widely and rapidly from a relatively small
number of original journal copies. In "Access to Periodical Resources : A Na-
tional Plan", by Vernon E. Palmour. Marcia C, Bellassai, and Lucy M, Gray, a
report prepared at the request of the Association of Research Libraries, it is
stated that a number of advantages accrue to the provision of photocopies in-
stead of originals. "Supnly of photocopies." the report states, "is more es-
sentially a 'mail order' or merchandising rather than a lending operations." It
235
is also noted tbat "A single copy, or in some cases a few copies, at a center can
meet, without undue delay, the needs of a large number of users."
In viewing the possible growth of service by a National Periodical Resources
Center, the authors estimated that from a collection of ten thousand titles, the
demand would grow starting in the range of 58,000 to 75,000 in the first year to
a range of 2,281,000 to 5,462,000 in the tenth year, with 90 percent of the request
being filled by photocopies.
Such estimates as these show expectations of a great growth in use of photo-
copied material. Obviously the direct uses of the printed journal would be very
small.
These data give some indication of the trends in use made of the published
literature without contribution of any share of the very considerable cost of
evaluating, organizing, and publishing it.
In another report, "Methods of Financing Interlibrary Loan Services," by
Vernon E. Palmour, Edwin E. Olson, and Nancy K. Roderer, a fee system is sug-
gested as a practical possibility with the fee initially set at $3.50, about half
the full cost recovery, and gradually increasing toward providing the full cost.
No consideration is given in this suggestion to payment of a fee to the publishers
from whose periodicals the copies are made. An adequate additional fee, paid
into a clearinghouse and distributed to the appropriate publishers, could spread
the full cost of support of a journals system equitably over the users.
It is desirable that use he made of modern technology in developing optimum
dissemination. This technology includes the use of modern reprography, but
as technology inherently includes economics the means of financial support of
the system must be a part of its design. Therefore, photocopying systems must
include an adequate means of control and payment to compensate publishers
for their basic editorial and composition costs. Otherwise, "fair use" or library-
photocopying loopholes, or any other exemptions from the copyright control
for either profit or non-profit use, will ultimately destroy the viability of scien-
tific and technical publications or other elements of information dissemination
systems.
The copyright law is directed to the interest of the public welfare. It is not
in the interest of the public welfare to modify the copyright laws so as to allow
the economic destruction of the scientific and technical information system.
The American Chemical Society is properly concerned with the clarity and
vitality of the copyright laws of the United States and of the world. These
laws have provided a sound basis for the continuity of scientific communica-
tion programs, including at present the primary and secondary journals, micro-
forms, and computerized information systems.
The Society recognizes that its members and others concerned with its pub-
lications are both "authors" and "users" of information, and that it is the So-
ciety's objective to serve their needs as fully as possible. It recognizes the
functions and problems of such vital information channels as libraries, infor-
mation centers, and information systems and networks. It further recognizes
the challenges offered by technological advances in communication techniques.
However, scientific communication programs cannot continue without proper
funding, and in the immediate future this funding must continue to come from
"authors" and "users." "Page charges" are an acceptance of the philosophy
that "authors" (or their employers) must share in the funding of the communica-
tion process, and that publication of findings is the final step in the completion
of a significant study. "Users" have traditionally paid their share through per-
sonal and employer (library) subscriptions to printed publications, but "tech-
nology" and "networks" are changing the need for multiple or even local copies,
making it all the more vital that revenue be obtained in relation to direct use,
wherever and however provided.
Because law is the basis for order among individuals, organizations, and na-
tions, the Society believes that the laws which affect communicaton — informa-
tion transfer — must be equitable and clear, and that they must be periodically
reviewed to maintain these qualities. The copyright law of the United States
has not been seriously updated since 1009, and it is badly in need of revision.
Its antiquity is the direct cause for present ethical and judicial arguments over
what is "fair" or "free" as regards communication — arguments which obscure
the basic rights of authorship : the "value added" factors in reviewing, editing,
publishing, and information-base creation ; and the fact that the real problem
236
is inadequate funding at most stages of the communication process (including
libraries).
Tlie Society has repeatedly and clearly stated its need for copyright pro-
tection against continuation and growth of "uncontrolled dissemination of scien-
tific information" — the unauthorized regular or systematic or concerted single-
copy republishing of Society papers by libraries or networks of libraries. The
Society is opiwsed to copyright-law revisions relating to "copying" that would
destroy the copyright protection for its publication programs.
Until communication issues can be further clarified, the Society would prefer
that "fair use" remain a judicial rather than a legislative concept. The So-
ciety is specifically opposed to any definition of "fair use" that could be further
interpreted as permitting unauthorized, concerted "single copying'' (photo-
copying, electronic copying, etc. ) .
The Society recognizes the need to develop total systems for information
transfer ; therefore, it specifically opposes any broadening or interpretation of
the definition of or the right to prepare a "derivative work" that would reserve
to "authors" (primary publications) the right to control the writing of original
informative abstracts that are not complete "abridgments" or "condensations."
However, the latter are accepted as being fully protected derivative works ;
they are of significance to the Society's future primary publication of "short
papers."
The Society advocates immediate copyright-law revisions that will more com-
pletely and explicitly define and continue to protect such technological develop-
ments as computerized information bases, computerized data bases, computer
programs, and microforms, i.e., that will define and specify these as "Exclusive
Riglits in Copyriglited Works." Because the scope and importance of these tech-
nological developments are already extensive, the Society no longer advocates
deferring related copyright-law revisions until after the studies and recommen-
dations of the National Commission on New Technological Uses of Copyrighted
Works. In particiilar, the Society firmly advocates revisions which clarify and
continue the protection of copyrighted computer bases at time of input, on the
basis that copyright control at output only might be limited severely by broad
interpretations of "fair use."
The Society opposes most of the specific additional limitations on the exclu-
sive rights of authors and their publishers to provide copies of copyrighted pub-
lications that are contained in recent legislative bills. As proposed, these limita-
tions do not really meet the needs of "users" and libraries for uncomplicated
copying.
The Society recognizes that these and other limitations on exclusive rights
to provide copies are based on the very real desire of "users," and libraries in
their behalf, to avail themselves of such "new technology" as photocopying to
prepare or obtain copies of copyrighted documents quickly and easily. The So-
ciety has repeatedly declared its readiness to cooperate in the developm_ent of a
clearinghouse that can grant such permissions in an equitable and simple man-
ner and is presently working actively tow^ard this goal through the Conference
on the Resolution of Copyright Issues under the chairmanship of Barbara
Ilinger, Register of Copyrights, and Fred Burkhardt. Chairman of the National
Commission on Libraries and Information Science. The Society also advocates
the development of "document-access networks" that will quickly supply actual
copies in an equitable maimer. The Society therefore advocates coiiyright-law
provisions that will equitably authorize and regulate such important services to
"users."
Despite reservations on some segments of this bill, the American Chemical
Society recommends passage of the sections of H.R. 2223 related to the library
pliotocopying. This recommendation is made with the belief, based on work witii
the Conference on the Resolution of Copyright Issues, that a practicable system
for licensing and fee collection for photocopies of copyrighted works can be de-
veloped wliich will render fair and equitable charges for systematic photoc^p.v-
ing in the interest of an improved and economically viable system for the dis-
semination of scientific information. Plans now are being developed for testing
such a mechanism.
Mr. Danielson. I believe the next gentleman is Mr. Hoopes, presi-
dent of the Association of American Publishers.
237
TESTIMONY OF TOWNSEND HOOPES, PRESIDENT, ASSOCIATION OF
AMERICAN PUBLISHERS
Mr. HooPES. Thank you, ]\Ir. Chairman. I am the president of an
association of 265 members who are responsible for the publication
of perhaps 85 percent of all the books published in this country.
On behalf of our association and speaking to some extent for the
other copyright owners, my purpose is to reinforce support for the
present sections 107 and 108, which INIr. Lieb has addressed in some
detail. Mainly I will summarize our recent experience with the library
community in seeking to be responsive to jwinted suggestions from
both the House and Senate Judiciary Committees.
The Senate report accompanying S. 18G1, which passed the Senate
last September, expressed the belief that section 108 provides "an
appropriate balancing of the rights of creators and the needs of
users." At the same time, recognizing the complexities, the report urged
the parties — in this instance authors, publishers, and librarians— to
meet together directly in order to develop more precise photocopying
guidelines for fair use; and also to develop workable clearance and
license arrangements for copying beyond fair use.
This urging by the Senate committee repeated a similar proposal by
the House Judiciary Committee in 1967. Responsive to that earlier
proposal, publishers and authors met with librarians in 1972 and again
in 1973 for discussions that became known, somewhat grandiloquently,
as the "Cosmos Club and Dumbarton Oaks talks."
The formula evolved at the Cosmos Club was that, if reprints of
journal articles were readily available from the publisher or his agent,
then the library would refrain from photocopying of its own. The
formula evolved at Dumbarton Oaks was that a journal publisher
would encode the front page of each journal article with a serial num-
ber and a reprint price, and that a librar}^ making a copy thereof would
so advise a clearinghouse operated by the publislier. At quarterly, or
semi-annual intervals the clearinghouse would bill the library for the
aggregate royalty charges, and would then distribute the proceeds to
individual publishers. Wliile both the Cosmos and Dumbarton efforts
were deemed feasible by the library participants, they were later both
shot down by officials of the various associations.
Since November, 1974, publishers have again been negotiating with
the librarians under the joint sponsorship of the Register of Copy-
rights and the Chairman of the National Commission on Libraries and
Information Science. Eight meetings of a 12-man working group were
held between early December 1974 and mid-April of this year.
I regret to say, Mr. Chairman, that there has not been much progress
to date, chiefly because the librarians have refused to accept either
the Senate bill, or the guidances suggested by the Library Commission
chairman and Miss Ringer, as in any way a limiting frame of refer-
ence. We have asked them, for example, to join with us in defining
typical situations of two kinds : (a) Those which would clearly involve
fair use copying, and (b) those which would clearly involve systematic
copying beyond fair use, thereby requiring permission and royalty
payment.
Their consistent reply has been that they know of no copying done
by libraries which extends beyond fair use. JNIr. Low in his statement
238
this morning complained about the practical difficulties of distin-
guishing single copying from S3^stematic copying, but it is a matter of
record that his group has refused even to discuss guidelines designed
to establish just such practical distinctions.
Having thus failed to come to grips with the substantive issue here
involved, the two sides have recently agreed to conduct a survey of
actual photocopying practices in libraries, and a test of a payments
mechanism modeled along the lines of the Dumbarton Oaks proposal.
But the library community has made clear tliat its participation in this
exercise in no way implies an obligation to pay royalties under any
circumstances.
I suggest, Mr. Chairman, two possible explanations for this unfor<^h-
coming attitude. Either the library community as a whole is still
attempting to secure total exemption from copyrights and expects to
get its way with the Congress ; or the attitude here expressed reflects a
minority view of the library conmiunity and is not, therefore, repre-
sentative of the whole. In this latter connection, I must say that we
are struck by the difference in the attitude we have found among local
librarians, and those expressed by the official spokesman of the library
associations in Washington. In the field, we have encountered wide-
spread sympathy for and understanding of the basic conce]:)t of copy-
right, and of the need for copyright protection, accompanied hy a felt
need for guidelines that will more precisely determine the dividing
line between fair use and infringement.
I would like to make brief mention in this same context of the Com-
mission on New Technological Uses of Copyrighted Works which was
established by law on December ol, 1974. Our association has sup-
ported and does support this commission. But we believe it would be a
serious mistake if Congress should seek to avoid coming to its own finite
conclusions on key copyright issues on the grounds that such questions
ought logically to be referred to the new commission. In our judgment
such a course would represent a serious abdication of congressional
responsibilit}^, and would increase rather tlian decrease the ensuing
confusion. In a true sense it would merely shift the debate to another
forum, and one not nearly so well placed as the Congress for bringing
the controversial questions to clear resolution.
In the nature of things, Mr. Chairman, the ramifications of the copy-
right issue in the context of rapid technological change will assure that
the new commission has a great many questions to debate and resolve.
But the commission's work will proceed on a far more liopeful basis
if the Congress accepts its own responsibility for setting workable
guidelines in the new law. In our judgment congressional endorsement
of the existing language of sections 107 and 108 would constitute the
necessary guidelines for print media.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Hoopes follows :]
Statement op Townsend Hoopes. President, The Association of American
Publishers
Mr. Chairman. My name is Townsend Hoopes. I am President of tlie Association
of American Publishers, the extent and influence of whose membership Mr. Lieb
has described. I should add parenthetically that, in addition to representing
publishers, I have written two books and intend to write more, so that my con-
victions about the need for copyright protection are based on authorship as well
as publishing, I agree with Ms. Ringer that protection of authors' rights is at the
239
very core of the Constitutional provision for copyright protection, and that the
need for such protection is a direct consequence of the need to assure continuance
of intellectual creativity, a function which cannot be performed by a committee
but only by an individual.
On behalf of the Association, and also speaking to some extent for the other
proprietary owners here assembled, my purpose is to reinforce support for the
present language of Sections 107 and 108 of H.R. 2223, which Mr. Lieb has ad-
dressed in some detail. Mainly I will summarize our recent experience with the
library community in seeking to be responsive to pointed suggestions from both
the House and Senate Judiciary Committees.
The Senate report accompanying S. 1361 expressed the belief that Section lOS
provides "an appropriate balancing of the rights of creators and the needs of
users" ; at the same time, recognizing the complexities, the report urged the
partie.s — in this instance authors, publishers and librarians — to meet together
directly in order to develop more precise photocopying guidelines for "fair use"',
and also to develop workable clearance and license arrangements for copying
beyond f:iiv use. This urging by the Senate Committee repeated a similar proposal
by the House Judiciary Committee in 1967. Responsive to that earlier prop(i.*;al,
publishers and authors met with librarians in 1972 and again in 1973 for discus-
sions that became known, somewhat grandiloquently, as the Cosmos Club and
Dumbarton Oaks talks. The formula evolved at the Cosmos Club was that, if re-
prints of a journal article were readily available from the publisher or his agent,
the library would refrain from photocopying of its own. The formula evolved at
Duii'barton Oaks was that a journal imblisber would encode the front page of each
journal article with a serial number and a reprint price, and that a library making
a copy thereof would so advise a clearinghouse operated by the publishers. At
quarterly or semiannual intervals, the clearinghouse would bill the library for the
aggregate royalty charges and would then distribute the proceeds to individual
publishers. While both the Cosmos and Dumbarton efforts were deemed feasible by
the library participants, they were later both shot down by othcials of the several
library associations.
Since November 1974, the publishers have again been negotiating witJi the
librarians under the joint sponsorship of the Register of Copyrights and tlie
Chairman of the National Commission on Libraries and Information Science.
Eight meetings of a twelve-man working grovip were held between early Decem-
ber 1974 and mid-April of this year. I regret to say, Mr. Chairman, that there has
not been much progress to date, chiefly because the librarians have refused to
accept either the Senate bill or the guidances suggested by NCLIS and Ms.
Ringer as in any way a limiting frame of reference. We have asked them, for
example, to join with us in defining typical situations of two kinds : ( a ) those
that would clearly involve fair use copying, and (b) those that would clearly
involve systematic copying beyond fair use thereby requiring permission and
royalty payment. Their consistent reply has been that they know of no copying
done by libraries which extends beyond fair use.
I suggest. Mr. Chairman, there are two possible explanations for this unforth-
coming attitude. Either the library community as a whole is still attempting to
secure total exemption from copyright, and expects to get its way with the
Congress; or the attitude here expressed reflects a minority view within the
library community and is not therefore representative of the whole. In this latter
connection. I must say that we are struck by the difference in the attitudes we
have found among local librarians and those expressed by the oflicial spokesmen
of library associations in Washington. In the field, we have encountered wide-
spread sympathy for and understanding of the basic concept of copyright and of
the need for copyright protection, accompanied by a felt need for guidelines
that will more precisely determine the dividing line between fair use and infringe-
ment.
I would like to make brief mention in this same context of the Commission on
New Technological Uses of Copyrighted Works which was established by law on
December 31, 1974. Our Association has supported and does support this Com-
mission, but we believe it would be a serious mistake if the Congress should
seek to avoid coming to its own finite conclusions on key copyright issues, on the
ground that such questions could logically be deferred for consideration ])y the
new Commission. In our judgment, such a course would represent a serious
abdication of Congressional responsibility, and would increase rather than
decrease the ensuing confusion. In a true sense, it would merely shift the debate
240
to another forum and one not so well placed as the Congress for bringing the
controversial questions to clear resolution.
In the nature of things, the ramifications of the copyright issue in the context
of rapid technological change will assure that the new Commission has a great
many questions to debate and resolve. But the Commission's work will proceed
on a far more hopeful basis if the Congress accepts its own responsibility for
setting workable guidelines in the new law. In our judgment, Congressional
endorsement of the existing language of Sections 107 and 108 constitutes the
necessary guidelines for the print media.
Mr. Danielson. You have some more time, if you like — Mr. Lieb
h«s a comment to make.
Mv. Lieb. May I respond as one of the many lawyers who was in-
volved in the wonderful case of Williams c& Wilkins, in view of the
questions that were raised this morning about it ?
First of all, Mr. Pattison, although it is true that the Supreme Court
decision said the judgment of the Court of Claims is affirmed on a
four to four vote, the established law is that such a decision by the
Supreme Court lacks any precedential value whatsoever as far as the
Supreme Court is concerned.
Second, I would like to point out to those who are not intimately
familiar with the bi-iefing in the case, that the Solicitor General in his
l^rief to the Supreme Court defended the practices as shown by the
record on appeal, and there was a very limited, narrow record of only
copying of eight articles of at most three times of one, the other twice
of one.
The Solicitor General defended the practices that appeared in the
record as not systematic and said in two places in his argument that
had the case had before it facts involving a library consortium, such
as vras recently established by New York Public Library, and Har-
rard, and others ; had it had before it a case of true systematic copying
the argument would not be made.
So, the WiUiams cC' Wilhins decision, such as it is, resting on a four
to three decision of the Court of Claims, is to be read most narrowly
not only because of the narrow facts in the record, but because of
the reservation and doubts of the Solicitor General with respect to
the principle involved.
Air. Danielson. Thank you. Mr. Pattison ? I think we can safely say
we have about 10 minutes between us, you take the first 5.
Mr. Pattison. I guess I'm just primarily concerned in terms of the
mechanical problems once some satisfactory or otherwise agreement
is worked out by Congress, and the mechanical problems of preclear-
ance, what is an adequate charge, how the proceeds are distributed,
recordkeeping with all the varieties of libraries that we have — ^tiny
onf's and great big ones— I would like to have some of your comments.
I tliink Mr. Hoopes has been very helpful on that, but it seems to me
some kind of agreement has to be worked out, some complicated mecha-
nism undoubtedly will have to be worked out to resolve those questions.
]SIr. PIoopES. If I may, INIr. Pattison, I would like to refer that ques-
tion to one of the gentlemen who participated in the working group.
Mr. Karp. Mr. Pattison, may I start by pointing out, the papers that
Dr. Kenyon submitted contain a description of a prototype, a proto-
type in which the mechanics are described. They start in part from the
device of a code printed on the first page of every article, indicating
the price, the identification of the publisher, and so forth.
241
The next step would be tlie Xeroxing of an extra copy of that page.
In other words, when the article is Xeroxed, the first X)age will be
Xeroxed tvv-ice. Those first pages will then be shipped in bulk to the
clearance center which would process them. The processing could be
done in various ways in wliich I don't want to get bogged down,
including optical scanning.
Beyond that, I also should point out, that is only one possibility. The
study group was involved, and hopefully will continue to be involved
in developing that system. And, as Mr. Hoopes pointed out, one of the
purposes of the study to be undertaken by the National Connnission on
Libraries and Information Science is to test the system and refine it.
One more thing, and I will turn it over to Dr. Kenyon. The history
of cop3^right is full of technological revolutions, this is not the first one
by far. Phonographs, motion pictures, television, radio ail developed
during the 1909 act ; and frankly, some of them are much more com-
plicated and more devastating in their impact on prior methods of
distribution. The jump from printing journals to photocopying,
quantitatively, is nothing compared to the jump from publishing sheet
music to performing music on long-playing phonographs and radio and
television. That was a tremendous jump, economically. Yet, copyright
owners and users were able to work out systems for licensing, facing-
problems much more comj^lex than what we have here. It's poppycock
to talk about the complexity of these problems, compared to the com-
plexities that face the performing rights societies.
And our problems can be handled much more easih% I think, in the
long run. But the important thing is to at least try, and not come up
to the author and back away ; and come up to the author and back away
in the manner Mv. Low described. If you go through the process of
trying you don't take away other people's property just by lightly
saying, "I, a librarian who has worked in the public field and public
funds for 40 years know that you businessmen can't cope with this
problem, so our solution is to take your rights away from you", that
just isn't something we can lightly accept.
I think that if the attempt is made to work it out — that may also
eliminate other complications. Here are 10,000 journals placed on mico-
film by copyright owners' permission. Other journals would be in here
if their proprietors were not fearful of the fact that once the journals
were photocopied by University Microfilms and sold to libraries, the
consequences on a photocopying exemption would be devastating.
Mr. Danielson. I think that the gentleman is referring to the rather
large catalog of microfilm work that is put out by Xerox.
Mr. Karp. University Microfilms, which is a subsidiary of Xerox
Co. Thank you, I have" taken too much time. I'll turn it over to Dr.
Kenyon.
Dr. Kenyon. I don't think you have gone into a detailed description
of the mefihanisms. The elements of such mechanism are included in our
report here. It is our view that the publishers said they believed that a
kind of system could be developed with the elements of this mecha-
nism, could be effective in receiving payment for photocopies. Library
people have said they doubt it.
But at least we have developed elements for such a system which have
been presented to the Conference on the Resolution of Copyright
Issues. And in the press release from the Library of Congress that was
issued in very recent days, it states that the National Commission on
242
Libraries and Information Sciences is prepared to assume responsibil-
ity for financing and to cosponsor with the Conference a project to
compile library statistics on photocopying, including testing a pay-
ment mechanism. As had been indicated, the interlibrary loan is a
very important instrument in providing information, and the added
matter of recording the photocopying that is done, and fitting that
information into a central clearinghouse, we believe, can be developed
in a relatively low-cost system, especially in view of the existing elec-
tronic mechanisms and continuing advancement with such mechanism.
2ih\ Pattison. I just have one more question. On page 6, Mv. Ivarp,
you referred to a Xerox per page fee as a royalty, and I am wondering
if that is accurate. In other words, is that the charge Xerox makes
when they lend a machine to you, whether you are taking pictures of
your hand, or some copyrighted material, there is still a fee.
Mr. IvARr. You copy a page, the library copies a page on the Xerox
machine— I think this is useful to illustrate that point — and Xerox
gets paid for every page they copy for the use of its property, 2 cents a
page, or whatever the arrangement is. The material on the page to the
librarians is of lesser significance, so they say it shouldn't be paid for.
If I may, Mr. Chairman, INIrs. Linden who has been prominent in
the deliberations on photocopying and represents several publishers
wishes to make a comment.
Mr. Danielson. Go right ahead, ma'am. You know we are on bor-
rowed time because the House is in session.
Mrs. Linden. I'll try, 2 minutes, thank you very much. The dis-
cussion this morning, its major portion centered on the photocopying
and duplication of scientific and technical journals. If you would be
good enough to look at sections 107 and 108, they deal — section 107 —
with fair use of all copyrighted material, sheet music, and the library
photocopying issue, the most immediate one by consensus of all, re-
lates to scientific and technical journals. But that is not to say that the
language promulgated in section 108 relates only to scientific and tech-
nical journals. Focusing too narrowly on the most immediate element
expressed this morning it is my fear — and I hope unfounded — that the
larger and fundamental issue might be overlooked, and that is a
change in the express language of 108, and the elimination of the sub-
sections requested by the library group would affect all intellectual
copyright, books, scientific books, encyclopedias of all kinds, children's
books, all literature that we are discussing. And it does so not only
retroactively where we are dealing with legislation, but proposes to
regulate prospective uses of all intellectual property.
And therefore I urge strongly that we not look so closely to the
minute of Professor Low's illustrations which we all concede are fair
use. and forget the basic issues that sections 107 and 108 relate to.
Thank you.
Mr. Danielson. Thank you. ma'am. For the record, will you give
us your name and your affiliation ?
Mrs. Linden. My name is Bella Linden ; I'm partner in the firm of
Linden & Deutsch and represent some of the major educational
publishers.
Mr. Danielson. I understand we are going to have you back
tomorrow, so, this is sort of an advance showing, is that right ? No ;
you are welcome back
[Laughter.]
243
Thank you. "We don't have a quorum call, we are in session, but
I have a couple of quick questions and comments I would like to make.
Dr. Cairns, you produced some interesting figures relative to circula-
tion. It would be helpful to me at least, and I think to the other mem-
bers of the committee, if you could provide us with some data on
that. And I hope you will be good enough in doing so, to be very con-
servative in your computations, so that we will have good, hard
figures to deal with. If you would comply with that request, we would
appreciate it.
Dr. CAiRisrs. We will give you those.
[The material referred to follows :]
American Chemical Society,
Washington, D.C., June 25, 1975
Hon. Robert W. Kastenmeier,
Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of
Justice, Committee on the Judiciary, U.S. House of Representatives, Wash-
ington, D.C.
Dear Congressman Kastenmeier: During the hearings held in May 1975 on
H.R. 2223, Congressman Danielson requested supplemental information of the
American Chemical Society for inclusion in the record of those hearings. There-
fore, I have enclosed for your information and that of the Subcommittee a chart
comparing circulation of scholarly journals published by the American Chemical
Society during 1969 and 1974. The request for supplemental information, which
indicates the magnitude of the decline in circulation of these journals, was made
during the discussion of the potential effects of continued photocopying on circu-
lation of scientific journals.
I have also taken the liberty of providing you with a copy of "Copyrighting
Physics Journals" by Dr. H. William Koch, Director of the American Institute of
Physics. Please note that the article has been reprinted from Physics Today — not
photocopied by us. I believe you will find that the article further indicates that
the decline in journal circulation is a result of widespread photocopying of single
articles.
On behalf of the Society, I wish to thank you again for the opportunity of
presenting our views on copyright revision as it relates to the issue of photocopy-
ina-. The Society would be pleased to cooperate in any way with you and the
Subcommittee on Courts, Civil Liberties, and the Administration of Justice in
resolving this issue.
Sincerely yours,
Robert W. Cairns.
Enclosures.
AMERICAN CHEMICAL SOCIETY
SCHOLARLY JOURNALS— CIRCULATION COMPARISONS 1969 AND 1974
1969 1974
Accounts of Chemical Research
Analytical Chemistry --
Biochemistry
Chemical Reviews _--
Industrial and Engineering Chemistry, Fundamentals
Industrial and Engineering Chemistry, Process Design and Development
Industrial and EngineeringChemistry, Product Research and Development
Inorganic Chemistry __
Journal of Agricultural and Food Chemistry -
Journal of the American Chemical Society...
Journal of Chemical Information and Computer Sciences
Journal of Chemical and Engineering Data..
Journal of Medicinal Chemistry
Journal of Organic Chemistry
Journal of Physical Chemistry
Macromolecules -.
Total - 154,774 126,697
18, 787
11,430
34, 947
32, 367
6,497
6,964
6,349
5,709
9,998
6,349
9,998
6,428
10,258
6,427
5,756
5,074
4, 857
5,013
19,419
15, 659
2, 063
1,948
2,619
2,143
3, 743
4,043
10, 557
9,440
6, 448
5,271
2, 478
2,432
244
Heprinted from
Copyr
Unauthorized photocopying and republishing by
other institutions threatens the v/ide dissemination of research
results and the financial stability of our publishing program.
H. William Koch
Changes in the manner of publishing
and disseminating physics information
have been coming faster and faster
during the last decade or so, and with
them they have brought an increasing-
ly urgent need for changes in copy-
lighting procedures and practices.
Every user of American Institute of
Physics and its member societies' jour-
nals is bound to be affected in sonie
"way, as will be the authors contribut-
ing to the journals, when journal copy-
Tight ambiguities and inconsistencies
are clarified. Will the individual
physicist, or his library, be able to con-
tinue purchasing primary journals and
secondary-information products at fair
market prices — or will he be subsidiz-
ing the commercial use of these prod-
ucts in some other form, or in some
other country? Will the one quarter of
all AIP society members who {accord-
ing to one count) themselves contrib-
ute, as authors, to the physics litera-
ture at some time or other be com-
pletely clear as to their rights to pro-
tect the scientific integrity of their own
published works? Or will they find
that questions concerning the re-use of
their works dissolve into a fog of inter-
national disagreements?
The issues involved in journal copy-
lights have scientific as well as fin.in-
cial significance; they are also funda-
mental and critical at this time. Soci-
ety officers are concerning themselves
more and more with the issues and feel
the heed for involving society members
in the problems and the resolution of
these problems.
The scientific issues are at times
subtle, relating to rewritten abstracts
that attempt to duplicate authors'
original abstracts, uncorrected pages
H- Williani Koch is direcior ol the Ameri-
can Institute of Physics.
that propagate inadvertent errors, and
inaccurate translatiuns into another
language. But the financial implica-
tions are clear. I shall present here
so.Tie estimate of the substantial re-
duction in .\IP and member-society in-
co.me represented by subscriptions lost
as a result of unlicensed publication of
complete issues of our journals in for-
eign markets, of unlicensed use of ab-
stracts, and of incieased photocopying
— all matters related to the copyright
Questions. The sum could be as high
as $1 miiiion per year; compare this to
the total subscription income of AIP
and its societies, in 1973, of .$4 mill'on
(from primary journals) and $275 000
(from secondary services), and you will
see why AIP and its member societies
cannot afford to ntglect copyright
issues. In fact, if the balance becomes
very much worse, one can see how the
entire physics-publishing operations of
AIP and its societies would become im-
periled— with repercussions that would
extend far beyond the AIP society
membership.
I should point out at this st.ige that
there is no intention of attempting to
limit the photocopying or reproduction
of single journal articles by individual
physicists for their own use. Indeed,
we take a favorable attitude to the in-
creasing use of the primary journal
material, such as in abstract journals
or in translations by foreign publishers.
This is, after all, in keeping with the
Institute's stated aim. the "advance-
ment and diffusion of the l.r.owledge of
physics . . ." Bui satisfactory agree-
ments must be worked out between the
copyright owner and the republisher to
protect the scientific interests of the
authors and the financial investments
of the publisher. Unless agreements
are completed, problems are bound to
develop. Typical of the existing prob-
lems are those, discussed in this arti-
cle, that arise from wholesale cover-
tocover copying of all, or pans of, AIP
and member-society journals by foreign
institutions, other publishers and li-
braries.
The problems
All of the primary and secondary-
journals of the :\\P and its member so-
cieties are copyrighted — see figure 1 for
the complete list. The copyright
owTier (AIP or member society) thereby
enjoys, according to one definition, ■■
"the exclusive right, granted by law for
a certain number of years, to make and
dispose of and otherwise to control
copies" of the journals. But this pro-
tection has disadvantages as well as
advantages arising from the fundamen-
tal limitation of statutary copyright
gensrally to ihe "expression of ideas in
a published work."- The copyright pro-
tects against outright copying, or para-
phrasing, but not against a subsequent
original work that utilizes the same
idea.^
There is a marked contrast between
copyright and patent issuing practices.
Patents are thoroughly researched and
eventually granted to protect the ideas
themselves; copyright is perfunctorily
registered, without research, when the
published work and its copyright no-
tice are presented at the Copyright Of-
fice and a $6.00 fee is paid. Also, to
establish proof of violation of copyright
one must prove actual copying of the
work; proof of patent violation, on the
other hand, may be found irrespective
of whether the defendant's work is in-
deed a copy or is an independent crea-
tion. Incidentally, there is common-
law protection against copying of. un-
published works.
In seeking adequate copyright pro-
tection for the journals, AIP and its so-
245
cieties are naturally trying to protect
their financial investment. Currently
an $3 million per year enterprise, this
physics-publishing business is worth
more than $30 million when integrated
ever the past five yeare. However,
there is another aspect that must also
be considered. AIP and society jour-
"nals contain almost 90% of all the
physics research and education results
published in the US. The journals
provide a means for establishing scien-
tific standards; they are the public rec-
ord of research performed by members
of AIP societies, and they are the basic
resource embodying the knowledge of
physics that AIP and its member so-
cieties are chartered to advance and
diffuse.
So what is wrong with copyripht as
far as we are concerned? The three
basic reasons for its inadequacy are:
> The antiquated copyright lav. of
1909, which could not anticipate new
copying technologies such as computer-
ized information systems, photo-
copying and micropublishmg
> Rapid expansion in the applications
of these techniques, without regard tor
copyright protection and, therefore,
■without recompense for lost subscrip-
tions
> Inconsistent, uncoordinated appli-
cation by .\IP and its societies cf the
values and rights represented by the
journal properties.
Here i will be dealing with the sec-
ond and fhi.-d of these three r;oints; the
leader is referred elsewhere^ for several
excellent summaries of the present
copyright laws and attempts at their re-
vision.
New copying technolog'es
Individual physicists have tradition-
ally approved cf the rapid and v,ide
dissemination of science information
made possible by the photocopying cf
journal arii.'les. Their attitude could
be summed up as "It's great; who cares
about the financial and legal details'"
This kind of emphasis on easy cop ;, ing
and dissemination may have been ap-
propriate ten years ago before other
significant considerations became as
compelling as they are today. But we
must now recognize that a means has to
be developed for obtaining rerompei'se
for the production costs of the journals,
despite tile elusiveness and pervasive-
ness of the new copying technologies.
Otherwise society dues, member sub-
scription rates and page charges for
physicists will have to increase, or the
journals and the societies will have to
stop their ojJeraiions.
Although AIP and its societies have
been actively developing techniques for
accomplishing and stimulating wide
dissemination of physics results, * these
developments must be coupled with an
appropriate sharing of expenses by m-
stltutional users, such as libraries, uni-
versities and re.search laboratories both
in the US and abroad. Not only docs
inadequate sharing exist in the US to-
day, but the situation is being aggra-
vated by the rapid growth in the tenden-
cies of various nations to reproduce and
dis-ieminate, within their boundaries,'
scientific and technical information
• originating in other countries without
recompense to the original publishers
for the resulting losses in subscription
income. Because 55% of the 300 000
subscriptions sold by ,\IP for itself and,
its member societies each year are to
foreign readers and institutions, the
significance to AIP and societies of
these international developments is
enormous, representing several million
dollars per year.
Three examp'es
To be more specific about these de-
velopments l:>t me give in some detail
thjee examples; these are ca.se.s where'
AIP and society journals ar.? repro-
duced by others on an inclusive, cover-
to-cover basis. They concern the pho-
tocopying, for sale, of oor journals by
the USSR, the copying of a'jstracts by
the Institution of E'.ectrical Engineers
in London foi use in Physics Abstracts,
and the reproduction of articles 'by ths
National Lending Library in England
for its customers in the UK. These
three examples ar? typical of the prob-
lems we are beginning to face on nany
fronts as massive operations threaten
tc displace the roles of AiP and its so-
cieties as pub!i.shcrs.
Last year the USSR signed 'he Uni-
versal Copyright Convention (eifective.
27 May 1973), and one result has been
that we now have some details c-i the
extent of cover-to-cover photocopying
of journals il) the Soviet Union The
data in Table 1, provided by the
USSR, show that some 15 AIP and so-
ciety journals ase currently bemg pho-
tocopiea and sold — every page of every
issue— in the USSR. The number of
copies of each issue is put at an aver-
age oi' 400, and sales are made at artifi-
cially set subscription prices to USSR
and east European custo'r.ers. The
additional income AIP would have re-
ceived had it sold these crpies amounts
to more than S30O0O0 per ycr.r.
We have other data relating to com-
plete translations of AIP .-^nd so':i».'ty
journals made in the USSR, but no de-
tailed information on the books of col-
lected papers, either photocopie.:! or
translated from our journals, that we
know in some instances are being pro-
duced in quantities of about 50 000 cop-
ies each.
'v'f'ith the signing of the Universal
Copyright Convention by the USSR
there is some hope tnat we can develop
equitable a.;;reements with them cov-
ering:
► dollar payments to AIP for lost sub-
scriptions for some journals
► royalty-free permission for AIP and
the Optical Society of America to con-
tinue their translations from Russian
into English of 15 Soviet physics jour-
nals, including about half of the Soviet
physics published in journals, in return
for:
^ reproduction privileges in the USSR
for some of our journals
► reductions in the number of com-
plete copies of AIP and society journals
produced in the USSR, competing with
our own sales in Asia and both western
and eastern Europe.
Negotiations now in progress are ex-
pected to set up a similar pattern of
future agreements with China, India
and other countries.
My second specific example concerns
Physics Abstracts, produced in London,
by the Institution of Electrical Engi-
neers. This publication uses, verba-
tim, every abstract from every journal
published by AIP and its societies.
Abstracts taken from AIP and society
journals represent a large fraction —
more than 257c — of the total numbers
of journal abstracts in Physics Ab-
stracts.
In recent times, increases in the
amount of physics literature to be cov-
ered and in the unit cost of including
each abstract combined to force up the
subscription prices tc Physics .Abstracts.
the key lEE service (now at $380 per
year compared to $12 per year in 1967).
The result was the virtual elimination of
the individual physicist subscriber from
the market for comprehensive abstracts
services and the concentration of lEE on
institutional subscribers. On the other
hand, AlP's obligation to attempt to
serve individual members with useful
abstract services continued.
!n order to meet that obligation, AIP
has negotiated with lEE to supply AIP's
abstracts in computer-readable form
and to be recompensed equitably for the
substantial savings accruing to lEE as a
result. Part of the agreement would re-
sult in i.''jcom? to assist in the improve-
ment in secondary services of the sort
listed in Table 2 and supplied by AIP to
individuals. Thus the agreement would
have financial as well as scientific im-
plications and would provide lES with
licensed u.se of AIP's copyri,;hted ab-
stracts. Abstracts written by authors
and reviewed by editors are just as much
a pari of the journal article as are
figures, tables, and indi'/idual para-
graphs, all cf which are protected by
copyrights.
Vve hope that negotiations with lEE
v;;ll lead to the continued use of our
author-produced .'.bstracts together
wi,h some arrangements for sharing of
the financial return from the institu-
tional sale of physics secondary ser-
vices. Th'js AIP could support the de-
velopment of this kind of service for its
246
PUBLICATIONS OF THE
AMERICAN INSTITUTE OF PHYSICS AtiO MEMBER SOCIETIES |
Ownttf and published by AlP
Prjmary Journals ana Proceeomgs
1 =
App),eO Physics Leiiers
Journal ot Applied Physics
Journal of Chemical Physrcs
Journal ot Maihemalical Physics
d%
PhyS'Csof Fluids
li
t \
Physics Today
/ 1
Review of Scienlilic instruments
I \
AlP Conference Proceedings
1 V
Journal of Physical and Chemical Refefence Dal
a*
y.
RMP ■ PRLJ ^ AJ?*
Translation Journals
/\ Af
Soviet Astronomy-- AJ
/ \ Jni
Soviet Journal Of Nuclear Physics
^V ^s^/ 1
Soviet Journal ol Particles and Nuclei
/ it ft
Soviet Journal ot Quantum E'ectronics
/ /\ A
Soviet Physics— Acoustics
12
/ / ^ \
Soviet Physics— Crystallography
/ / *\
Soviet Physics — OoKlady
/ AJP / A
Soviet Phys'cs— JETP
/ y\ Jr \
JETPLellers
/ i\/^ \
Soviet Physics— Semiconductors
11
/ in \
Soviei Physics— Solid Siaie
/ / /l *
Soviel Physics— Technical Physics
/ / V J \
Soviet Physics — Uspekhi
Secondary Publications
/ //'*• t /"^ H
Searchable Physics information Notices (tape!
10
I /ik-- 1 / W
Current Physics Microform (microfilm)
f lr\^ i/ V^RMP
Current Physics Advance Abstracts
■^
1 IvVV V in^A \
Current Physics Titles
■o
c
/ IH ^^/*"^i'' y\ '^'"'
Owned by Ihe American Physical Society
S
3
/ J>l ^V ^\./ \
Primary Journals
Physical Review A B, C. 0
c
9
/ u ^v\/x'°*'
Reviews of Modern Physics
C/l
f ilr i^S. \I AO
♦ Physical Review Letters
O
1 ^'t^m 1 ^\. \
Secondary Publications
c
8
0 ) jrm J \k
Bulletin o( the American Physical Society
// III / /m *"
• Physical Review Abstracts
in
• Physica' Review Index
3
f / / II "/ / Jl^ "5'
Owned by the American Association ot
_i
7
t,^ f \i ^/ / 1 1
Physics Teachers
American Journal of Physics
O
/v 1 ^\ y ^/ 1 VAf.
The Physics Teacher
/ J' i \ i ]^ \^^ w
• AAPT Announcer (bulletinlt
// y 1 i/^ /^\
Owned by Ihe Optical Society ot America
Journal ol the Optical Society of America
t
/I ^^ / // ,^^i \.
Program o! the OSA (bulletin)
/ f^^^\ f / / g jT I ^V
• Applied Optics
/ sf*^ ^^ / / i * --•■^ ■'^^
■ Opiics and Spectroscopy (translation)
f jp f y I f ^^
Soviet Journal ol Optical Technology (Iranslalion
t j/i / .^/ / 1
Owned by the Acoustical Society of America
5
1(1 /^^^ / X I
Journal o' the Acousncal Society ol America
ill /"^"^^ // 1
Program ol ASA (bulletin)
Owned by the Society ol Rheology
11 j / y / / /J\. S A=L
• Transactions of the Sociei/ of Rheology
i
// / X ,<^v- ^ ^ ^^ £f ^^.
• Rheology BuMe'int
f^S' // / f ^^ X r ^*<fc^^''*'^\
Owned by the American Astronomical Society
/ lA ^y^ J1^T^~^^'
Astronomical Journal
BuHeiin of the AAS
3
Owned by the American Cry&tallographic
^^ iy 1 ^^ y^ w /^^' ^^
Association
y / jT jT / / JVST |. ^JMP
• ACA Newsletlert
RMP /f i / / 1 / i*\^
Owrted by (he American Association o(
\„^ // / 1 / / ^^ ^^
Physicists In Medicine
2
~ ^^ ^f ^ 9^ / i^^ _M-"^\_ J
Medical Physics
AJP>V^/ /^ ^"^
Owned by the American Vacuum Society
^^^r jf /
(aftllialed)
^"^^^^ AJ
The Journal of Vacuum Science and Technology
1
■ S^^
JCP
All journals are copyr-ghied by Ihe owner
excepl where shown otherwise
* Jointly cooynghled by A IP and Ihe
American Chemical Society
L 1 1 1 [ 1
t Not copyrighted
1945 (950 l^.^S I960 1965 1970
YEAR
• Journals shown with this bull9l are published by
the owning society, the remainder are published
A(P
and society puDlicalions are listed at left ariangecj accordirg io owner. The graph
by AlP lor the society
above shows toiai si,bscripi;ons (member plus nonmember) since ^0-3 1 Figure 1
247
memberships at reaaanable subscrip-
tion prices, in analogy to the way insti-
tutional income from the primary jour-
nals allows AIF and its societies to pro-
vide membc-j with primary services at
low subscription prices.
Other abstracting and indexing ser-
vices, such as Chemital Abstracts Ser-
vice, Engineering Index. Bulletin Sig-
naietique and Referativni /'hjrnal,
should recognize that we encourage
them to use the ?bstracts from AlP
and society copyrighted journals, so
long as they do not produce English-
language, secondary services in the
science of physics that detract from
Oervices AIP could produce for its own
society memberships with its own copy-
righted material. Therefore, we plan
to institute procedures for licensing
the use of our copyrighted material by
other services, and we expect that in
most cases these licenses will be readily
granted.
The services offered by the National
landing Library, Boston Spa, l.'K, pro-
vide me with my third example of new
copying techniques thai affect ou.- op-
erations here at AIP. This library has
developed an overnight mail serv.ce
through which copies of articles from
any journal can be supplied to'custom-
ers in the UK at low cost. Such an
operation is the forerunner of future
similar services in every major country
of the world. The major Er.glish-lan-
gtiage abstracting and indexing service
in the science of biology is eagerly
awaiting' the arrival of such services in
tbe US. and in that same field an in-
vestigation is in progress "to discover
whether there is not a large number of
journals for which one copy could ade-
quately serve US. British and Canadi-
an user;."'
The position AIP and its societies
takes on developments such as these,
intended to provide better access ser-
vices to the journals, is. of course, fa-
vorable. Indeed, we are eager to see
such services growing, and plan to sup-
port them with the products and ser-
vices that are their raw materials.
However, just as with the Soviet pho-
tocopies and the use of copyrighted r\h-
stracts mentioned earlier, we should be
recompensed for subscriptions lost be-
cause of these services if we are to
maintain financial viability.
The financial :ilua(ion
How much money i.= involved in lost
subscriptions from, say, just the three
examples cited above?
From the information supplied by
the USSR on their photocopied-journal
sales, we know we have lo.= t S300 000
each year from that category alone.
Add another estimated SUXioOO for
losses due to their translation journals
and book collections made up of A!P-
publishec art'cles, and we find a total
lor.; to AIP from the Soviet operations
of more than S400 000 per year. For
the loss of income to AIP and societies
resulting from the lack of a licensing
agreement with ICE for Physics Ab-
stracts we can look at the conclusions
of lEE's negotiating team as they were
slated during the summer of 1973.
That team agreed with the concept of
AIP receiving $190 000 per year for the
use of the computer tape, and we can
therefore assume this to be a minimum
estimate of the annual loss in AIP in-
come from this source.
My third example above, cover-to-
cover reproduction of articles from AIP
and society journals, gives rise to a loss
of income that is much harder to figure
than it was for the first two examples.
The loss of subscriptions that the AIP
and its member societies have suffered
over the last five years has been sub-
stantial—see figure 1. We have lost
about 20% of the total number of sub-
scriptions we had in 1966. Domestic
non-member and member subscription
losses account for most of this decline,
while foreign subscriptions and total
sixiety membership have been rela-
tively stable. We therefore make the
assumption that the subscription loss
is attributable largely to wholesale
copying of single articles by institu-
tions in the US. An estimate of the
dollar value of the subscriptions lost
for this reason is about $400 000 per
year.
The total estimated losses for these
three effects is thus about $1 million
per year, an estimate that is admitted-
ly crude. If this money were available
to AIP and the member societies, page
charges to authors and subscription
prices to readers could both be de-
creased, with obvious benefits for the
Table 1. Reproduction o^ AIP and society journals in the USSR
Journal
American Journal of Physics
Applied Optics
Applied Physics Letters
The Journal of the Acoustical
Society of America
Journal of Applied Physics
The Journal of Chemical Physics
Journal of Mathematical Physics
Journal of the Optical Society of
America
The Journal of Vacuum Science
and Technology
Physical Review. A, B
Physical Review C, D
Reviews of Modern Physics
Physical Review Letters
The Physics of Fluids
Physics Today
Bulletin of the American
Physical Society
Subscription
rates
(In rub'es)
AIP-
USSR
Society
11.76
J7.25
27.00
41.25
12.76
21.40
29.40
36. CO
53.88
46.90
99.35
92.25
24.60
38.25
16.08
34.50
5.40
29.25
85.20
92.25
127.80
103.40
7.48
9.75
31.72
47.25
26.16
38.25
12.36
10.15
U.60
13.15
No. of copies
sold by USSR
No. of
No. of copies
to eastern
subscriptions
produced by
European
purchased
USSR
countries
through AIP
425
90
2
474
71
4
283
30
19
462
114
2
695
120
7
425
91
12
253
57
2
495
74
2
276
69
4
436
57
28
338
51
72
469
74
15
424
60
20
314
60
3
251
47
15
248
35
5
41.00 = 0.74 rubies
Data obtained from Yuri K. Mcfn'ik, Aishtonf Science AUcche, So\iet fmfaoiiy, Wathington O.C.
248
"advancement and diffusion of the
knowledge rf physics."
Copyright principles
To protect the financial viability of
AIP and society publishing operations,
the appropriate principles involved in
the copyright process need to be pre-
sented and understood in some detcil.
We should remember that the particu-
lars of the copyright claimed for a
given pliysics article will affect four
different individuals or groups: the
author of the articjc, his employer, the
publisher of the journal and individual
users and republishers._ Let us consid-
er each in turn.
First, the author of the article. He
originates the material that is pub-
lished and usually makes the decision
on where it should first appear (with
either active or tacit agreement of his
employer). He decides whether the
subject matter of the article should be
patented, whether it should be sup-
plied to a publisher for a fee, or to a
publisher (such as .MP) who expects a
fee in the form of page charges. Once
he makes this decision, the author
should comply with the conditions of
the publisher — normally stated in the
journal or by a separate letter.
If the author decides to p-.iblish with
AIP or one of the member societies, he
should be asked by the publisher to as-
sigT!, in writing, full publication and
republication rights to the publisher.
This request should be made at the
time the editor accepts the manuscript
for publication.
Should the article be subsequently
republished, either by itself or as part
ct a collection of articles, the original
publisher should give the author the
opportunity to register errata or correc-
tions to the material «s first published.
Thereafter, the publisher should serve
for the articles in his trust as the Siien-
tilTc and financial negotiator with
republishers.
The author should have the right to
make nonprofit or noncomm.ercial use
of his work, provided he affixes to each
copy, in the position legally required,
the copsTight notice used by the AIP or
society publisher when the article was
first published. To make or authorize
commercial use, for profit, of his work
the author must first obtain the writ-
ten consent of the AIP or society.
I mentioned earlier that the copy-
right protection is limited to the ex--
pression of ideas in the published work
and protects against outright copying
of the work but not against copying of
the ideas. The author must be aware
of this limitation.
The author should be given the op-
portunity to write his own abstract,
and also to assign the appropriate clas-
sification and indexing terms required
when the article is inserted into the
Table 2. Secondary services
Meetirj programs o! abstracts (for exam-
ple. BAPS, PASA, etc)
Physical Review Abstracts
Annual journal indexes
Cunnulative journal indexes
Current Physics Titles
Current Physics Advance Abstracts
SPIN computer tape of abstracts from
journal articles
Bibliographies (lists of articles) on a given
subject
Journal tables of contents
data base of an information-retrieval
system. He can thus be assured of the
scientific validity of both abstract and
classification. This author-written ab-
stract then becomes as much a part of
the copyrighted material oi" his article
as the individual paragiaphs of the
main text, or the figures, tables, and so
00.'
The second individual affected by
copyrighting procedures is the author's
employer. He normally helps to defray
the cost of publication of his
employee's manuscript, if it is to ap-
pear in an AIP or member-society jour-
nal, by making a page-charge contribu-
tion; in return he may want to main
some rights over the published materi-
al. For example, the employer might
give permission for first publication
only, reserving to himself the rights for
republication if such conditions are ac-
cepted by the publisher, if no condi-
tions are stated when the manuscript is
submitied, the publishe' must assume
that there are none — except those dic-
tated by custom or tradition.
When the employ".- is the US Gov-
ernment we have a special case. Arti-
cles ivritten by US (jyvernment
employees as part of their official
duties are in the public domain and
are not covered 'oy copyright.
The publisher is the third individual
for whom copyright interpretation is
important. He may elect to publish
only that material for which he has full
publication rights, both for initial and
republication. AlP-owned journals op-
f/ate under the principle that ur.'ess
otherwise stated, submission of a man-
uscript is a representation that it has
not been copyrighted, published, or
currently submitted for publication
elsewhere.
When a publisher such as the AIP or
a member society copyrights an issue
of one of its journals, the rights apply
to the whole issue. Such a copyright
fives the publisher, as against third
parties, "the same rights i.s if he had
secured a separate copyright on each
individual piece."* This statement
applies equally to the copyright protec-
tion of each individual abstract of a
copyrighted issue of Physics Abstracts,
for example, as it does to the protec-
tion of each individual abstract in an
AIP or society copyright journal. For
this reason, abstract services (such as
Chemical Abstracts Service) have in-
sisted that their copyright notice ap-
pear on copies made, under license and
for a fee, of pages and abstracts from
their abstracts journals— even whea
these abstracts are taken verbatim
from copyrighted journals.
Lastly, we should consider the rights
of individual users and republishers.
An individual scientist has an accept-
ed right to copy a copyrighted article*
for his own use under the traditional
copyright concept of "fair use." Repu-
blishers. as in the three examples in
this article, will at times use the argt^-
ment that they are operating under the
"fair use" concept. Clearly, when la
republisher uses every page or every
abstract in a systematic, production
manner, whether for commercial or"
ncnccrnmercial purposes, he is doing
something more than "fair use" and
is in infringement of copyright if he
does so without permission of the copy-
right owner.
What are the prospects?
Our exam.ination of the copyright
issues that face AIP and its member
societies has shown how complex are
the problems that ari.se under US copy-
right laws; then how much more
.complex must be the international im-
plications! The examples quoted ear-
lier in this article dem.onitrate in some
degree how the AIP and member so-
cieties' publishing program interacts
with the programs of foreign publish-
ers, libraries, and so on, each operating
undci the copyright law of his own
country. These other nations too are
taking a hard look at copyright legisla-
tion in the light of m.odem develop-
m.ents, with the result that we can ex-
pect a shifting pattern of interrelating
national copyright laws to affect our
physics journals for some time to come.
One e.^ample of the kind of change
we might expect is the licensing
scheme, varieties of which are being
tried out in at least three countries —
Swiden, France and Canada. The
Swedish scheme permits multicopying
of works protected by Swedish copy-
right only on payment of a small fee.
Sii.'veys indicate that 150 million
page-copies are made in Sweden each
year; rough estimates for the US
suggest that several billion page-copies
are made here per year. Even if the
new scheme works in Sweden (and it is
still too new for conclusions to be
drawn) we cannot be sure that a simi-
lar plen would be appropriate here.
While we are monitoring possible US
develupments in the national copyright
249
laws, AIP and its member societies
have to keep in mind the framework of
the entire US publishing business and
be aware of how they fit into that
framework. We would deceive our-
selves if we believed that new copy-
right laws will be drawn up solely for
the benefit of this institute and its so-
cieties— or even for the entire scientific
publishing effort.
The problems of the scientific jour-
nals are quite dissimilar from the prob-
lems faced by the publishing industry
as a whole; in the area of photo-
copying, for example, where according
to one estimate an average physics ar-
ticle is of special interest to only six
readers and would be copied by an
equally small number.
Any conceivable new copyright law
in the US would be directed primarily
to the larger needs of the general pub-
lishing industry. One could imagine
circumstances in which rules framed
for this community would wipe out the
. specialized scientific journals.
Currently changes in the law are less
important as a day-to-day threat than
changes in reprographic technology,
which is moving very fast in the US
and indeed over the whole world.
Each new advance in copying technol-
ogy is potentially a new area where AIP
and society copyright protection might
be eroded yet further.
The institute and its societies must
establish clear and complete copyrights
on all their publications, protect these
rights once established, and contin-
uously and closely monitor all develop-
ments that could endanger their own
financial investments and the scientific
accuracy of their members' published
works.
Important contributions to this article were
made by various members of the AIP staff
and committees and, particularly, by Mor-
ton Dacid Goldberg of Schwab and Gold'
berg. New York City. Their assistance is
gratefully acknowledged.
References
1. The Random House Dictibnary of the
English Language (.Jess Stein, ed). Ran-
dom House, New York 1 1966); page 323.
2. Omnibus Copyright Recisian- Compara-
tive Analysis of the Issues. Cambridge
Research Institute {American Society for
Information Science), Washington D.C.
(1973); page 97.
3. See Copyright: Current Vieupoints on
History. Laws and Legislation (A, Kent,
H. Lanour, eds). Bowker, New York
(1972); and reference 2.
4. H. W. Koch, "Support the Communica-
tions Revolution." editorial in PHYSICS
TODAY, February 1973, page 88.
5. Biological Abstracts. 56(4), 15 August
1973.
6. Information, Part 1, 5(2), 66 (1973).
7. Reference 2, page 90.
8. Reference 2, page 161. □
,87-786 — ^76 — pt. 1 17
250
Mr. Danielson. Thaiik you. Now, Mr. Lieb and Mr. Hoopes, you
both referred to an item that troubles me here, the definition of
"systematic reproduction," what do you mean by that? And please
give it to me kind of quickly, if you could.
INIr. Lieb. When a library, whether it is the large central research
library, or the mother library in the network, when by plan or effect it
regularly produces copies — regularly as distinguished from spo-
radically or on occasional instances — regularly produces copies
which are provided to the user in lieu of the original, the book or the
journal
Mr. Danielson. You are talking about a continuing operation, as
opposed to an intermittent or sporadic one.
Mr. Lieb. Correct, and the Senate report makes that clear.
Mr. Danielson. Is that what you have in mind, also ?
Mr. IvARP. I would quickly refer you to the Senate report ; it gives
the general definition as an example.
Mr. Danielson. You are adopting the definition, then, in the Senate
report.
Mr. Karp. And I would point out that the Senate then urged the
parties to sit down and work out more detailed guidelines.
Mr. Danielson. Funny they should have that foresight because I'm
on the verge of making that same request. [Laughter.]
So, could you consider that request as having been renewed ?
Mr. Lieb, was copying of the type we were discussing today a sig-
nificant problem before the advent of the quick copying equipment ?
Mr. Lieb. I don't think so, sir.
Mr. Danielson. I am going to make an observation, then. Quick
copying is here to stay; in fact, it is going to get quicker, and easier,
and* better ; it is bound to. So, I think what we have to do. instead of
fighting the inevitable like the motion pictures fought television for
a long time — we just have to find a way where we can accommodate
this tiling, and live with it. Copying is not going to go away.
Mr. Hoopes. That's right, Mr. Chairman, and that is precisely our
position. The publishers are in no way opposed to wide dissemination ;
we would simply like a reasonable licensing arrangement to cover
works that are g'oing to be copied in very large quantities ; that is to
say, under systematic copying arrangements.
Mr. Danielson. I was glad to hear that other people don't worrj^
about the first amendment because I find it quite a problem in this
committee.
One other item I had here. What about page charges, Dr. Cairns?
Dr. Cairns. The page charge came to the fore in about 1962 and
applied, I think, almost entirely to the publication of technical socie-
ties, wliicli was honored by a Government policy, which was first
enunciated in 1964 by the Federal Council on Science and Teclmolooy,
which allowed the page charges wliich were in the order of $20 to
$50 a page, printed page, of a publication, allowed this as a valid
charge against reseai'ch grants of Federal agencies. It was subse-
quently then I'oissued in slip:htly modified form by Dr. Guy Stevers
within the past vear. That charge Avas studied by the technical socie-
ties, and genernlly speaking it is not mandatory; in other words, pub-
lication proceeds, even though page charges are not honored. But it
is a source of income.
251
Mr. DANiELSoisr. To whom?
Mr. LiEB. To the societies who are publishing journals, and is
entered into the budget of the general publication.
Mr. Danielson. What does the author of these articles derive in the
way of monetary or other valuable considerations?
Mr. LiEB. He gets fame and prestige.
Mr. Danielson, That's what I thought.
Dr. Cairns. That is the name of the game.
Mr. Danielsox. Oh, I have written a few, and I received exactly
the same amount. [Laughter.]
Mr. Karp. Speaking for the authors, let me make this point. First
of all, I should point out Mr. DeCassey who sits behind me represents
the — association, no, page charges are not available from Govern-
ment grants to commercial publishers, for profit.
Mr. Danielson. By "society" you are talking about a so-called non-
profit organization.
Mr. Karp. The point I would make is this. First of all, the amend-
ments and exemptions proposed by the library associations apply
to all single copjdng, a tremendous amount of which is done of literary
and artistic material, short stories, essays, the works; those authors
write for money. As Dr. Cairns has pointed out, there is a very
definite monetary motive for authors to write.
Mr. Danielson. One last question. In the type of copying tliat we
are talking about, technical journals and the like, as opposed to the
ones Mrs. Linden will tell us about tomorrow, w'hich cover the whole
gamut of intellectual products, who are the users in the sense of —
are they something scandalous like "The Scarlet Letter" or are they
truly technical books ? Who uses them, in the sense of what category
of person uses those copies ?
Dr. Cairns. I didn't hear what you said.
Mr. Danielson. Are we talking about fiction here, or are we talk-
ing about strictly technical types of information ?
In the Constitution it says here, "To promote the progress of science
and the useful arts"; now, are we talking about "Gone With the
Wind," or are we talking only about
Dr. Cairns. Wliat we are talking about are the general terms of
science. I think Mrs. Linden spoke about the useful arts.
Mr. Danielson. We have a quorum call on. Thank you very much
for your patience. You know, by holding over for 12 minutes you got
exactly your allocated amount of time. I appreciate your help very
much ; I'm sorry we couldn't give you more time.
Just winding up, tomorrow we will meet again, at 10 o'clock, and
for the record, we have statements from the American Business Press,
the Federal Librarians Association, the Special Libraries Association,
the Wisconsin Interlibrary Loan Service, ]\Iusic Library Association,
Association of Research Libraries. Williams & Wilkins Co., American
Institute of Chemical Engineers, Advocates for the Arts, Department
of Health, Education, and Welfare, Dr. Ray Woodriff", IMontana
State University, and the American Association of Law Libraries.
[The following statements were received for the record :]
252
Statement of American Business Pbess, Inc.
The American Business Press, whicti is composed of some 400 specialized
Ijiisiness publications published from coast to coast, is extremely concerned
about the growing practice of unrestricted photocopying Avliich has been evidenced
in recent years, and only compounded by the Williams and Wilkins decision.
Unless a way can be found to protect the ability of periodical publishers to
spend the money to gather, edit and produce technical and scientific informa-
tion, and then distribute it throughout the nation, the flow of that information
can be seriously curtailed.
Some American Business Press member publications, like Oil and Gas Journal,
are sent to paid subscribers. Others, like Iron Age, are sent via the controlled
circulation route to readers who specifically request the receipt of that publica-
tion. In the first instance, both the reader and the advertiser supply the funds,
through the publisher, to permit the gathering and editing of technical and
scientific articles, which are then copyrighted. In the second instance, the
publication's primary income comes from advertisers. In both cases, necessary
information is distributed to people employed in every phase of the technical
and economic activity.
If the Information and the articles gathered by editors are photocopied with-
out the consent of the copyright owner, we will have situations arising like
the one dramatized in the attached Exhibit A. We have deleted the name of
the company which sent the memorandum out, but w^e present for the considera-
tion of the Committe what is happening.
The only effect of curtailed subscriptions or curtailed circulation which this
practice will cause is a severe restriction upon the securing and circulation
of important editorial information because scientific and technical publications
will not have the wherewithall to gather and edit the information to be photo-
copied. If this happens, the important news and scientific and technical infor-
mation gathering function performed by the specialized business press will be
seriously impaired, and there will be considerably less information to photo-
copy for those who do not respect copyrights.
We think the attached example tells the story better than we can. Hopefully
the Committe and the Commission established in the last Congress will come
up with solutions to this most serious problem. The American Business Press
stands ready to be of whatever assistance it can in this effort.
Attachment : Exhibit A.
Exhibit A
To : All Home office executives. Apeil 10, 1975.
Re : Market Research Library Periodical Service.
A service provided by the Market Research Library primarily for Market
Research personnel is being expanded and offered to all home office executives.
The Library presently receives the 79 publications on the attached list. Check
off the ones that interest you and return them. You will receive the monthly tables
of contents of your choices.
From these tables of contents, choose the articles you want, circle the titles
and return them to the Library. Xerox copies of the articles will be sent to you.
Please use this service to help supplement your current reading and to elimi-
nate or cut back on your present subscription costs.
H.R.
Market Research Library Periodical List
(Table of contents service)
1. Aspo Planning Advisory Service (Monthly).
2. Aspo Planning Magazine (Monthly).
3. Aspo TAB Bulletin (Semi-Monthly).
4. Advertising Age (Weekly ) .
5. American Book Publishing Record (Monthly).
6. The American Statistician (5-Year).
7. Annals of Economic and Social Measurement (Quarterly).
S. Atlantic Monthly (Monthly).
S. Banking (Monthly).
10. Bank Marketing (Monthly).
253
11. Barrens (Weekly).
12. Boardroom Reports ( Semi-Monthly ) .
13. Bureau of Census Catalog (Quarterly).
14. Business Conditions Digest (Monthly).
15. Business Periodical Index (Monthly).
16. Business Statistics (sheet of paper) (Weekly).
17. Business Week ( Weekly ) .
18. OSA-Coops and Voluntaries (Monthly).
19. CSA-General Merchandising- Variety Executive Edition (Monthly).
20. CSA-Supermarket Stores Edition (Monthly).
21. Changing Times (Monthly).
22. Conference Board Record (Monthly).
23. Consumer News (Bi- Weekly).
24. Consumer Reports (Monthly).
25. Direct Marketing ( Monthly ) .
26. Discount Merchandiser (Monthly).
27. Discount Store News ( Bi-Monthly ) .
28. Drug Topics ( 2xMonth ) .
29. Dun's Review (Monthly).
30. Editor & Publisher ( Weeklv ) .
31. Funk & Scott Index (Weekly).
32. Financial Trend (Weeklv).
33. Food Advocate (Monthly).
34. Forbes (2xMonth).
35. Fortune (Monthly).
36. Fund Raising Management (Monthly).
37. Gasoline News (Monthly).
38. Harvard Business Review (Bi-Monthly).
39. Home and Auto (Monthly).
40. Housewares (Monthly).
41. Incentive Marketing (Monthly).
42. Industrial Marketing (Monthly).
43. Journal of Contemporary Business (Quarterly).
44. Journal of Marketing (Quarterly).
4^. Journal of Marketing Research (Quarterly).
46. Journal of the American Statistical Association (Quarterly).
47. Journal of Retailing (Quarterly).
48. Kiplinger Wa.shington Letter (Weekly).
49. Library Journal (2xMonth).
50. Majors Composite Market Survey (Weekly).
51. Marketing Information Guide (Monthly).
52. Marketing News (2xMonth).
53. Marketing Review (lOxTear).
54. Mass Retailing Merchandiser (Monthly).
55. Merchandising Week (Weekly).
56. Modern Grocer (Weekly).
57. Money (Monthly).
58. Monthly Labor Review (Monthly).
59. National Geographic (Monthly).
60. National Mall Monitor (Monthly).
61. National Observer (Weekly).
62. NPN (Monthly).
63. Nation's Business (Monthly).
64. Newsweek (Weekly).
65. New York Magazine (Weekly).
66. Progressive Grocer (Monthly).
67. Psychology Today (Monthly).
68. Restaurant Business (Monthly).
69. Salesman (Monthly).
70. Sales Manager (2xMonth).
71. Shopping Center World (Monthly) .
72. Smithsonian (Monthly).
73. Stores (Monthly).
74. Supermarketing (Monthly).
75. Supermarket News (Weekly).
254
76. Survey of Current Business (Monthly),
77. Time (Weekly).
78. Travel and Leisure (Monthly).
79. Wall Street Transcript (Weekly).
Statement of Julius J. Maeke, On Behalf of the Amebican Association
OF Law Libraries
Mr. Chairman, and members of the Committee, I am Julius J. Marke, Law
Librarian and Professor of Law, New York University. I am Chairman of
the Copyright Committee of the American Association of Law Libraries, and
am appearing on its behalf.
The American Association of Law Libraries (A.A.L.L.) was established in
1906 and presently has a membership of approximately 2,000 law librarians
servicing University Law School libraries, Bar Association libraries, County
Law Libraries, Court libraries, State Law Libraries, and Practitioners Libraries
throughout the nation. Its Headquarters is located at 53 W^est Jackson Boule-
vard, Chicago, Illinois, 60604.
The A.A.L.L. is established for educational and scientific purposes and is
conducted as a non-profit corporation to promote librarianship, to develop and
increase the usefulness of law libraries, to cultivate the science of law libra-
rianship and to foster a spirit of cooperation among the members of the pro-
fession. It has twelve regional chapters, known as Association of Law Libraries
of Upstate New York, Chicago Association of Law Libraries, Greater Philadel-
phian Law Library Association, Law Librarians of New England, Law Li-
brarians' Society of Washington, D.G.. I^aw Library Association of Greater
New York, Minnesota Chapter of A.A.L.L., Ohio Regional Association of Law
Librarians, Southeastern Chapter of AALL, Southern California Association of
Law Libraries, Southwestern Chapter of AALL and Western Pacific Chapter
of AALL. Foreign Law Librarians, residing in the following countries, are also
members of the American Association of Law Libraries : Canada, Australia,
Belgium, Colombia, England, Ethiopia, West Germany, Finland, France, Israel,
Italy, Jamaica, W.I., Japan, Korea, Netherlands, New Zealand, Nigeria, North-
ern Ireland, Republic of the Philippines, Singapore, Sudan, Sweden, Switzerland,
Tanzania and Turkey.
The American Association of Law Libraries is also a publisher of scholarly
and technical publications. It publishes The Law Library Journal, The Index
to Foreign Legal Puhlications, the A.A.L.L. Puhlications Series, Current Pub-
lications in Legal and Belated Fields and the A.A.L.L. Newsletter. In addition
the hidex to Legal Publications is published by the H. W. Wilson Co. with the
cooperation of the A.A. L.L.
Although the A.A.L.L. has reservations about other parts of H.R. 2223. I
shall address my comments to those sections of the bill affecting library photo-
copying.
The A.A.L.L. joins other national librai-y associations in recommending leg-
islative safeguards and exemptions for those library uses of copyrighted works
necessary to guarantee the public access to library resources for educational,
scientific and scholarly purposes.
The ma.1or concern of the A.A.L.L. is that sections lOS(g) (1) and 108(g) (2)
negate the grant to libraries in section 108 to make single photocopies of copy-
righted materials,
I. legislative safeguards and exemptions
Section 108(g)(1) limits the right of reproduction and distribution under
section 108 only to "the isolated and unrelated reproduction or distribution of
a single copy of library materials on "separate occasions". It does not extend,
however, to cases where the library, or its employee is "aware or has substan-
tial reason to believe that it is engaging in the related or concerted reproduc-
tion or distribution of multiple copies . . . whether made on one occasion or
over a period of time and whether intended for aggregate use by one or more
individuals or for separate use by the individual members of a group."
Section 108(g)(2) denies to libraries the "systematic reproduction or dis-
tribution of single or multiple copies" of material described in section 108(d).
255
The AALL is concerned that library systems are evolving in many forms and
as a result not even librarians have enough information on library networks all
over the country to arrive at an acceptable understanding of the situation.
Therefore, it is impracticable at this point of time to define "systematic" with
reference to these "systems". Actually, librarians are only attempting to use
available resources adequately and maximize their collections rather than
economize at the expense of the publishers by promoting photocopying of their
library materials. An example of one of these "systems" is multi-county libraries
organized to support a single library system. In this context, librarians are
concerned about foreclosing interests by definition. Legislative restrictions with
reference to "systems" when read into the copyright revision law, could create
problems in the future as technological developments in this area are so un-
certain and unforseeable at present. They also are in direct conflict with the
express Congressional intent as a matter of public policy to encourage the
creation and promotion of such "systems" as set forth in the Higher Education
Act referred to under 1(d) supra.
The AALL also insists that "systematic" library photocopying restrictions
under section 108(g) (1) and 108(g) (2) must be relaxed to reflect a recognition
of a library's right to make single photocopies of materials in its collection
and the applicability of the "fair use" doctrine. Librarians are concerned that
"systematic" can be used to whipsaw them. Sections 108(g) (1) and (g) (2) de-
part from "single" and "multiple". If "systematic" swallows up "single" and the
applicability of the Fair Use doctrine then librarians protest. "Systematic" can
only refer to "multiple" copying.
The AALL also protests that the concept of library single photocopying as
"fair use" is now limited under section 108(g) (1) to "isolated" and "unrelated"
single photocopying.
Then again, what is meant by words and phrases in Section 108(g) such as
"period of time"? One day, one week, one month, one year? What is meant by
the library or its staff "know or has reason to know", of "multiple copying"?
At what point and under what circumstances is the library administration put
on constructive notice of multiple photocopying? What kind of records must be
kept by the library of these activities, or type of consultation required of staff
members involved to prevent such "related or concerted" reproduction? W^hat is
meant by "distribution" in the section? "What is a branch library? Is the Law
Library on a university campus a branch library of the University Library
System?
Librarians cannot depend on the courts applying "rule of reason" construc-
tion to these nebulous words and phrases in section 108(g). Librarians have
serious reservations about this approach and must insist on specific guidelines
to prevent "prior restraint".
"Systematic" library photocopying as set forth in section 108(g)(2) allows
for a construction depending on "availability" as the key factor in determining
when a "system" exists for this purpose. Therefore, any system which provides
the comfort of availability of a publication to a library, which therefore does
not have to provide for it in its budget, would be "systematic". As a result, a
listing of library holdings of serials, such as to be found in the Union List of
Serials (which has been on the open market for more than 40 years), even
though not prepared for commercial advantage, or for the purpose of interlibrary
loan, still provides this availability, and therefore becomes a "system". Hence,
any identifiable source of books in print plus knowledge of it by librarians to
identify materials they lack for interlibrary loans would amount to a "system".
This pervasive effect is considered intolerable by librarians as it could have
serious adverse consequences for research and the dissemination and flow of
information, especially as services by libraries. Then again, it must be recog-
nized that merely because a library "system" exists, it does not necessarily
follow that all photocopying within the system is "systematic".
The A.A.L.L. also protests that as there is no objection to interlibrary borrow-
ing of specific hard copy materials under these so-called "systems", why should
librarians not be able to make a single photocopy of these materials when
randomly requested on interlibrary loan as a substitute for hard copy, especially
as permitted in sect. 108 (d) of the Copyright Revision Bill.
In a sense these criticisms of section 108 of the revision bill were reflected
and implied in the Register of Copyrights' testimony on S. 3976 before this
256
Committee on November 26, 1974 (93rd Cong. 2d Sess, Serial No. 59, 1975)
when she stated :
"Ms. Ringer." . . . Section 108 of the revision bill (dealing with the making of
single photocopies by libraries) is by no means suflBcient to solve the larger prob-
lems of reprography, especially in libraries . . . Neither the enactment of the
revision bill in the form in which it passed the Senate nor a definitive decision
of the Supreme Court in the Williams and Wilkins Case is going to settle the
larger issues here. . .
"Discussions are under way in the private sector, now on this subject, in recog-
nition that nothing the Congress does ... is going to solve this issue for the fu-
ture, and that it is an issue that very desperately needs solving. But both of these
important issues, namely, computer uses and reprography urgently need to be
studied in depth by recognized experts", (p. 6-7) .
The AALL recommends that "these important issues" be submitted for solu-
tion to the recently created National Commission on New Technological Uses
of Copyrighted Works inasmuch as P.L. 93-573, 88 Stat. 1873, enacted into law
on December 31, 1974 charges this Commission to study and compile data on the
use of copyrighted works" in conjunction with automatic systems capable of
storing, processing, retrieving, and transferring information, and ... by various
forms of machine reproduction . . .". In the interim period sections 108 should
be redrafted to meet the objections set forth above.
II. LIBRAKT PHOTOCOPYING ISSUES AND THE COPYRIGHT REVISION BILL
A. Purpose of copyright protection and the puMic interest
Generally, the purpose of copyright protection is to encourage and reward
authors of intellectual works and other creative artists to produce such works
for the benefit of society, by granting them the exclusive right during a specific
period of time to copy, or otherwise multiply, publish, sell or distribute them,
as well as to prepare derivative works based upon the copyrighted work. They
are also given the exclusive privilege to perform and record these works and
to license their production or sale by others during the term of the copyright
protection. Basically, the purpose of copyright, as is tested in Article 1, Section
8, Clause 8 of the U.S. Constitution is "to promote the progress of science and
the useful arts". This necessarily implies that the copyright holder's rights are
never absolute for the monopoly granted serves the added purposes of stimulating
the development of scientific and other types of knowledge and to encourage the
dissemination of this knowledge to the public.
To avoid frustrating this purpose, the courts have adopted the concept of a
"fair use" doctrine which permits individuals and institutions, other than the
copyright owner, to use the copyrighted material in a reasonable manner without
the owner's consent. In essence, the "fair use" doctrine attempts to balance the
rights of the owners of copyrighted works to their just economic rewards against
the rights of scholars and researchers to use these works conveniently in their
scholarly endeavors. As the "fair use" doctrine is an equitable rule, each case is
determined on its own facts. The courts in the U.S. generally apply the following
guidelines laid down initially by Mr. Justice Story in 1841 in Fnlsom v. Marsh,
9 Fed. Cas. 342 (CCD Mass.) in deciding whether an infringement or fair use
has occurred : "We must ... in deciding questions of this sort, look to the nature
and objects of the selections made, the quantity and value of the materials used,
and the degree in which the use may prejudice the sale, or diminish the profits,
or supersede the objects of the original work."
On the issue of pul)lic interest, it is relevant to note a question raised by
Professor John C. Stedman. What are the rights of an author and those in
privity with him? He suggests that it is a policy question of "more or less", not
a legal question of what are his rights in the educational process. "How much
it is necessary and desirable to give to the author in order to stimulate and
encourage him to write and publish in the educational field !" Look at the
"effects" of granting or denying copyright protection rather than refer gen-
erally to the "interests" of the author. Educational activity, in practical effect
and in terms of public interest, must be distinguished from other activities with
reference to copyright protection. Consideration must be given to the strong
public purpose behind educational activity. "Beware!!" he cautions authors
and publishers, if the copyright toll becomes too onerous for educational activi-
257
ties to absorb, the result may be foregoing use of the material completely. (See
AAUP Bulletin, 53 :129 (June 1967) ).
B. Library photocopying and copyright protection
Replication of copyright works is daily taking place in libraries as part of
the research and educational process. At present it is primarily reflected in
reprographic reproduction (reproduction by photographic methods or processes
analogous to photography), and is an established and recognized practice in
library administration, teaching and research.
Reprography in libraries and for educational purposes should not be confused,
however, with computerized retrieval of data and information, which in its
present state of development is hardly a serious threat to owners of intellectual
property but which could eventually become so. Researchers, librarians and
educators in the future will then become involved with new techniques of elec-
tronic document-storage and computerized information-retrieval systems just as
they are presently learning about the tremendous potential of miniaturization
and remote transmission of data.
Currently, the most pressing problems facing owners and users of copyrighted
works lie in the reprography area as distinguished from electronic systems.
Scholars, researchers and librarians, relying on the doctine of fair use, have
always felt free to copy by hand the works of others for their own research and
study needs. When copying machines become available, it was a simple transi-
tion for these scholars, etc., to extend their note-taking to photocopying from
copyrighted material. Publishers maintain that the new machine-copiers made
replication of their copyrighted materials so easy and inexpensive that their
sales are being detrimentally affected to the point that if allowed to continue
they will be forced out of business. As a result, the creator of information
would lack the income from his ideas to maintain a degree of independence.
Educators particularly object to any limitation of their right to make machine-
copies on the grounds that they, like librarians, are not doing so for profit ;
nor for any direct or indirect commercial advantage, but rather to promote
the educational process.
The traditional library position on reprography in libraries is to the effect
that not only under the Fair Use doctrine, but also as a natural extension of
customary library service, a library may make a single copy of copyrighted
material it has purchased, for the scholarly use of any of its readers or another
library, requesting such service, if done without profit. Such service, employing
modern copying methods has become essential. The present demand can be
satisfied without inflicting measurable damage on publishers and copyright
owners. Improved copying processes will not materially affect the demand for
single-copy library duplication for research purposes. Librarians also argue,
no matter who is involved, whether it be the librarian, the publisher, or the
creator of information, the main concern should be the public interest in access
to information. Copyright protection should not be an impediment to transfer-
ring information.
C The economics of library photocopying and the public interest
Publishers allege that although libraries are not in the business of photo-
copying for profit, still by doing so, they are depriving publishers of the oppor-
tunity to sell additional copies and even to maintain their current subscrip-
tions. In the Williams d Wilkins case, however, involving a U.S. government
library's unauthorized photocopying of copyrighted medical periodicals for and
at the request of medical researchers and practitioners, the U.S. Court of
Claims not only held this practice constituted "fair use", but that "there is
inadequate reason to believe, that it (the publisher) is being or will be harmed
substantially by these specific practices." Actually, this conclusion is borne
out by the realization that if most of the users in libraries who photocopy
copyrighted materials would be deprived of this opportunity, they would not
purchase the original material. Then again, researchers, scholars and academi-
cians rarely purchase all or even a few of the books and/or journals they use
in their research. They receive complimentary copies and reprints of articles or
they borrow library copies. Only if these sources fail to provide the materials
sought, do they resort to photocopying. The publishers' complaint that photo-
copying is depriving them of profits because of lost sales is therefore not a
completely valid conclusion. Many of the potential sales the publishers envision
are not of the type that ordinarily occur. It appears to be, that the publishers,
despite all this library photocopying, are no worse off than before.
258
While libraiies and large industrial organizations are principally involved in
replication of copyrighted materials (also there is much private and casual copy-
ing by students, faculty and others in college and university libraries) still they
continue to purchase many new titles and journal subscriptions, as well as main-
taining the older subscriptions. It should be also recognized in this context that
these institutions cannot physically shelve more than a few copies of a journal,
etc., due to lack of space and thei-efore would never purchase a great number
of subscriptions to a journal merely because at one time there was a demand for
additional copies of a given article.
In this context, we should also review the economics of publishing. It is an
established fact that publishers of scientific and technical journals, publish
limited editions of their issues so that they often are unable to sell additional
copies on demand as early as two months after publication. They do not invest
in maintaining stock of back issues of their publications, and hardly ever reprint
them. Thus, depriving themselves of the opportunity to sell their back issues
on demand. vStill they are insisting on the payment of fees additional to the sub-
scription price of the publications, for photocopying rights of these back issues.
Then again, publishers, especially in the areas of scientific and technical refer-
ence works do market research before publishing new titles and publish them
<mly when assured that libraries will purchase them in addition to specialists in
the field. When they determine that the sale of a particular work will be limited,
the list price established is increased to reflect this in order to insure a profit.
Surveys have also established that as many as 80% of authors of scientific
articles are more interested in dissemination of their articles than in receiving
royalties. In the scientific field, it should also be noted, authors not only do not re-
ceive remuneration for their articles, but often are required to pay for the cost
of having them published or absorb the cost by purchasing a stated number of
reprints. It has also been noted that subjects dealt with in scientific literature
and some of the other disciplines such as law have become so specialized that most
researchers in those fields are interested sometimes only in one article out of the
many published in a particular journal. Reprography in libraries and documen-
tation centers appears to be the only obvious way today for researchers to have
access to the many scholarly resources of their field.
Publishers complain, however, that they are bearing the economic brunt of
this development. The hardw^are and paper used for reprography are bought and
paid for by libraries, etc., why shouldn't publishers be given additional income
for the right to make copies of their copyrighted works ! They also add that even
though .scientists, etc., etc., pay for publication of their research papers, they
should be interested in the survival of the scientific journals which give them an
opportunity to disseminate their findings and research reports.
Librarians respond to this copyright confrontation as follows: Non-profit li-
brary institutions are not in business and have nothing to gain by photocopying
for others. Their purpose is only to promote research in the sciences and human-
ities in the public interest. They are involved with access to knowledge and its
bibliographical control so that scholars, educators, scientists, etc., can use such
data in their research and in the process create new information and materials.
Why should librarians, under these circumstances be caught in the middle of
the conflict between owners and users of copyrighted materials, and be required
to take sides? When we become concerned with technology and economics, we
must realize that they are not material to the library's ulterior purpose of in-
formation dissemination.
Library institutions do have an interest in the reproduction of copyriglited ma-
terials for their own internal, nonprofit purposes. They have a vital concern in
conserving copies of periodicals and of works in their collection which are out
of print, under certain circumstances. They also have an interest in reproducing
multilated or missing pages of works in their collection. Then again, in order
to conserve their collection, they recognize the need to photocopy materials in
their collection for other libraries, requesting them on inter-library loan. Ground
rules should be negotiated for these purposes but not at the expense of limiting
the free flow of information, and certainly not with the added cost to libraries for
administering a system involving payment of fees, licensing, etc., for the benefit
of owners of copyrighted works.
D. The new technology and the copijright revision hill
What position should this committee take with reference to computer technol-
ogy and related copyright problems? When the integrity of a basic collection
of materials, copyrighted and otherwise, compacted and stored in electronic
259
information-center computers, will be preserved by Xerographic printers provid-
ing facsimile reproduction by remote transmission in hard-copy form, or by
video scanning of ephemeral copy on a closed-circuit TV monitor elsewhere ;
when the library collection will remain intact because the computer, in essence,
will assume the role of a duplicating rather than a circulating library ; when one
copy of a book fed into such a system will service all simultaneous demands for
it ; when microfiche and computer print-outs will replace copyrighted hard-
copy publication of research reports, as well as of scientific and technical ma-
terials currently appearing in journals, monographs and books, and when audio-
visual dial-access teaching machines, operated by remote control, will provide
hundreds and even thousands of students with simultaneous audio and visual
access to a journal article or excerpts from a l)Ook, it is obvious that the pub-
lishers" traditional market will be affected by these developments and the copy-
right laws will have to respond to this "non-book" production.
Merely on the issue as to when an infringement will occur with reference to
input, stoi'age and retrieval of a copyrighted work fed into a computer without
permission of the copyright owner remains still to be resolved. Output or re-
trieval of the copyrighted work may be in the form of abstracts, excerpts, or
the work as a whole. It may be delivered to the user in tangible form such as a
photo-duplication or in ephemeral form such as the temporary projection of an
image on the screen. Should the output of an information storage and retrieval
system be considered a copyright infringement or derivative work if such
output is an index, abstract, limited quotation or analysis of the copyrighted
work? "No," reply some copyright experts, except to the extent that the output
is likely to diminish the demand for a copyrighted work, because then the doc-
trine of fair use should govern. Some experts note that the term "copy" is a word
of art construed by the courts in the U.S. to mean a copy which is "visually
perceivable" and in "tangible form" and therefore when we are concerned with
computer output of punch cards or tape, we are "copying". Thus, the experts
cannot agree when a computer system has infringed on a copyright owner's works
or for that matter to v>'hat extent. Professor Benjamin Kaplan, contends that
infringement should not turn on input conversion but rather on output conver-
sion— on what is subsequently done with the stored work.
Tliere are other copyright problems brought out by the new technology,
e.g., notice of copyright and deposit, whether doctrine of fair use is applicable.
The state of the art today, however, is not sufficient to warrant the acceptance of
rules and regulations governing the use of copyrighted materials. When "non-
book" production will predominate, the role of the commercial publisher will
probably change, especially in his relationship with authors and readers. Pul)-
lishers may also decide to play a different role with reference to regional, national
and international information networks. Libraries will also have to readjust
their concepts of reader's services and technical operations and may even become
eventually part of projected government information networks. Thus, it is pos-
sible that the new technology will change the concept of author protection and
that copyright protection will be of little help to the author of scholarly works.
Rather than depending on royalties, these authors and/or their publishers will
sell directly to the information-system operator either as a complete sale or upon
an accounting based on use. The computer could easily be programmed not only
to incorporate the new "work" into the existing data but also arrange for account-
ability of its use in the system. Subscribers to the system will pay for its
maintenance.
As a result, many other problems will arise, e.g., the amount of control gov-
ernment will have over these information systems, rates to be established and in-
ternational agreement and treaties will have to be negotiated to reflect the needs
of the system.
In light of all these possibilities, it is my thought that this Committee can-
not take a position at present affecting copyright and computer based informa-
tion storage and retrieval systems. We must await developments in this field
to the point where we will be aware of the implications of our decisions.
I would respectfully recommend that this is a problem for the newly created
National Commission on Neiv Technological Uses of Copyrighted Works to resolve.
260
The long range problems arising from the effects of this new technology on copy-
right must first be identified by the Commission and then it should "make rec-
ommendations as to such changes in copyright law or procedures that may be
necessary to assure for such purposes access to copyrighted works and to provide
recognition of the rights of copyrighted owners" as it has been charged by the
U.S. Congress to do.
Mr. Chairman, I appreciate the opportunity of appearing here to present the
point of view of the American Association of Law Libraries.
Statement of William M. Passano, Chairman of the Board,
Williams & Wilkin s Co.
I thoroughly enjoyed meeting with you on May 13, and I appreciate the oppor-
tunity to review with you the subscription figures for the 27 .Tournals pnl»lished
by The Williams & Wilkins Company. You may recall that a compelling reason
given by the four judges of the Court of Claims for finding library photocopying
of our Journals to be "fair use" was that we had not convinced them that this
practice was doing harm to the financial condition of the Journals. It is true that
in 1973, when the Court of Claims decision was handed down, we had no statisti-
cal proof of damage.
However, the figures now available, which compare 1973 with 1974 and which
I showed you when I was in your office, do to my mind show that the library net-
works are, in fact, doing just what they were designed to do ; namely, reducing the
number of Journals which the libraries subscribe to, since the needs of library
patrons can be served by obtaining photocopies of requested articles as inter-
library loans through the network systems.
You will notice that the individual subscriptions to the 27 Journals which we
publish have increased nearly 17%, comparing 1974 with 1973. Foreign subscrip-
tions of all kinds have increased approximately 13%. Furthermore, there has been
a healthy increase in the number of hospital subscriptions, due primarily we
believe to the ever-growing number of community hospitals. This record indi-
cates that the Journals as a group are in demand as purveyors of scientific knowl-
edge and are highly respected by the scientific community. Furthermore, we credit
much of the increase to the effectiveness of the very substantial direct marketing
efforts which we have made during the past year.
The record of individual and foreign subscriptions, however is in sharp con-
trast with the institutional subscriptions which in the same period of time have
fallen off by 3%. I think it is safe to say that this decrease in institutional sub-
scriptions, at a time when individual and foreign subscriptions have substan-
tially increased, is not due to lack of popularity on the part of the Journals in
question, but is becau.se of the ease with which interlibrary loans (photocopies)
are obtained through membership in library network systems, and that these
photocopies can and do replace the necessity for institutions subscribing to the
Journals in question. Certainly The American Chemical Society subscription fig-
ures confirm this with even larger declines.
We do not quarrel with photocopying, nor do we object to the network sys-
tems. They are effective means of eflSciently disseminating scientific knowledge.
We do believe, however, that those who use the Journals by photocopying them
should share in their support and not leave the entire burden on the shoulders
of the subscribers, the authors and the advertisers, as is the case at prei^ent. It is
for this reason that Section 108(g) (2) of the proposed Copyright Bill must be
retained if the scientific press is to remain viable and free from governmental
subsidy and control.
It should be borne in mind that fully 65% of the cost of producing the typical
scientific periodical is incurred before the first copy comes off the press. This
means that only a comparatively small erosion of the subscription list can greatly
affect the unit cost and therefore jeopardize the financial security of the Journal.
Again, many thanks for permitting me as a member of the Proprietary Rights
Committee of the Information Association to place these facts before you.
261
STATUS OF SUBSCRIBERS TO 27 WILLIAMS & WILKINS JOURNALS COMPARING 1973 WITH 1974
Number of subscribers
Type of subscriber
Change in
1973
1974
percent
28, 405
33, 137
+16.8
36, 430
41,147
+12.9
8, 796
9,562
+8.75
15, 369
14, 909
-3.0
3, 262
3,361
+3.3
5, 198
5,149
-.95
489
413
-15.6
1,112
1,149
+3.3
3,644
3,523
-3.3
1,674
1,314
-21.7
Individual domestic
Foreign individual and institutional
Hospitals
All other domestic institutions
Breakdown of domestic Institutional subscribers
Medical schools
Universities and colleges
Public libraries
Corporations (drug manufacturers)
U.S. Government libraries and departments.
Associations, foundations, laboratories
Statement of Hon. David Mathews, Secretary, Department of Health,
Education, and Welfare
There is now pending before your Committee H.R. 2223, a bill "For the
general revision of the Copyright Law, title 17 of the United States Code, and
for other purposes."
In brief, the bill as presently worded contains a provision [Subsection
lOS(g) ] which would severely hamper the flow of biomedical information between
the National Library of Medicine and the nation's medical libraries and thereby
reduce the information available to researchers and practitioners. Deletion of
Subsection 108(g) would remove this restriction. However, if deletion of this
Subsection is not possible modification of the language contained therein would
accomplish the same goal.
We transmit herewith a brief technical report which contains an analysis
of select provisions of the bill under consideration and the effects which they
might have on the programs of the National Library of Medicine, a bureau of
the Department of Health, Education and Welfare.
We are advised by the Office of Management and Budget that there is no
objection to the presentation of this legislative proposal from the standpoint
of the Administration's program :
An Analysis of the Possible Effects of Section 108 of H.R. 2223, General
Revision of the Copyright Law
House of Representatives bill, H.R. 2223 "For the general revision of the
Copyright Law, title 17 of the United States Code, and for other purposes,"
now pending before the Committee on The Judiciary in the House of Representa-
tives, would provide for the first general revision of the copyright law since
its passage in 1909. Section 108, "Limitations on exclusive rights : Reproduction
by libraries and archives" provides that it is not an infringement of copyright
for a library or archives to reproduce no more than one copy of a work for
non-commercial purposes in order to preserve deteriorating materials, replace a
damaged or lost copy that can not be purchased at a fair price, or provide a
copy for the use of an individual library patron for scholarship and research.
However, Subsection 108(g) prohibits "the related or concerted reproduction
or distribution of multiple copies or phonorecords of the same material, whether
made on one occasion or over a period of time" whether intended for the use
of one individual or a group. It also prohibits "the systematic reproduction or
distribution of single or multiple copies" of a copyrighted work.
Subsection 108(g) in its present form, depending on the interpretation of
"systematic reproduction," could possibly make operation of the current inter-
library loan program of the National Library of Medicine and its Regional
Medical Library network an infringement of copyright, thereby seriously impair-
ing the nation's health research and scholarship.
The NLM is a "library's library" serving as the back-up source of materials
requested by patrons of local medical libraries but which are at that time absent
from their collections. There are many reasons for the non-availability of litera-
ture which necessitates that a local library request an interlibrary loan; among
the common reasons are that the material requested are out of the local library
on loan or at the bindery.
To provide more rapid dissemination of biomedical information, the Library
has developed a network arrangement through which biomedical literature
262
can be shared more efficiently by medical libraries throughout the nation. Eleven
major institutions have been designated Regional Medical Libraries to provide
iiiterlibrary loan services to other libraries in their regions.
The interlibrai'y loan program provides to requestors photocopies of articles
from periodicals and brief excerpts from monographs for the purposes of private
study, scholarship and research. Single photocopies are provided in lieu of
loaning the original literature as a means of safeguarding NLM's archival
collection and of assuring uninterrupted availability of the literature of NLM
and the resource libraries of the Regional Medical Library network.
The term "systematic reproduction" as used in Section 108 (g) (2) is not
defined in the bill, but if it is to be used to describe that reproduction carried
out in connection with interlibrary cooperation, such as in the Biomedical
Library Network, it will mean the end of this oi'derly and efficient medical
literature exchange.
Section 108 in H.R. 2223 is identical to Section 108 of S. 1361 which was passed
by the Senate in 1974. It is important to note that the Senate report which accom-
panied S. 1361 dealt with this issue of systematic reproduction.
The report indicated that Subsection (g) (2) stipulates that Section 108
does not authorize the systematic reproduction or distribution of copies of articles
in periodicals or of small parts of other copyrighted works whether or not
multiple copies are reproduced or distributed. Systematic reproduction or distri-
liution occurs when a library makes copies of such materials available to other
libraries or to groups of users under formal or informal arrangements whose
purpose or effect is to have the reproducing library serve as their source of such
material. The report states that such systematic reproduction and distribution
enable the receiving libraries or users to substitute the copies reproduced by the
source library for subscriptions or reprints or other copies which they might
otherwise have purchased for themselves, from the publisher or the licensed
reproducing agencies.
The potential effects of Section 108(g) are unsure; however, as the Senate
Subcommittee interpreted "systematic reproduction" in 1974, NLM's present
interlibrary loan program might be found to be an infringement of the copyright
law if amended as proposed in this legislation.
Although Section 108(a)-(f ) appears to allow for the photocopying of journal
articles. Subsection 108(g) (2) threatens to destroy the effectiveness of the
biomedical library network and to seriously undermine the ability of local medi-
cal libraries to provide medical literature and information requested and needed
by the health community. It could in effect eliminate the present practice of
interlibrary loans which would seriously impair the dissemination of medical
information throughout the nation.
Deletion of Subsection lOS(g) (2) would permit the continuation of an
unrestricted flow of medical information among libraries. If deletion is not
possible, another approach which might accomplish the goal would be to amend
Subsection 108(g) (2) by adding the language underlined below:
(2) engages in the systematic and unlimited reproduction or distri-
bution of single or multiple copies or phonorecords of the same material
described in Subsection (d) so as to suhstmitially impair the market for, or
value of, the copyrighted work.
For purposes of avoiding ambiguity the bill should include explicit definitions
of "systematic reproduction" and "fair use."
Statement op Kevin J. Keaney, General Counsel for the Federal Librarians
Association
The Federal Librarians Association, incorporated in the District of Columbia,
is an organization of professional librarians who work in the libraries and docu-
mentation centers of the U.S. Government throughout the world. This statement
is submitted to express the view of the association relative to the proposed copy-
right legislation, particularly Section 108(g) (2).
Section 108 permits the reproduction of single copies of certain materials, in
certain circumstances, and under certain conditions, by libraries and archives ; but
paragraph (g) (2) withholds that permission or right in ". . . cases where the
library or archives, or its employee : . . . engages in the systematic reproduction
or distribution of single or multiple copies of phonorecords of materials described
in subsection (d)."
It is the view of this association that this paragraph will, on the one hand,
subject the library and the librarian to a liability so serious as to inhibit the
263
primary puriwse of Article I, Section S, of the U.S. Constitution, and on the
other hand, provolie by the vagueness of the term "systematic" endless and
unprofitable litigation.
Federal librarians and Federal libraries have the duty to serve the public
by providing whatever documents are available. We contend that the public
interest is best served when the documents are provided subject to the primary
puri>ose of the constitutional provision (". . . to promote the progress of Science
and the useful Arts. . .") and subject to no more than other parts of Sections
107 and 108. We believe that the "fair use" provisions of Section 107 are
.sufficient protection to the holder of copyright, buttressed by the more specific
provisions of Section 108, but excluding paragraph (g)(2). Librarians do not
believe that the public interest is served by unrestricted and unconditional photo-
copying, but we do believe that the restrictions and conditions contained in
other parts of the legislation are sufficient to safeguard the legitimate rights of
the liolder of copyright. When Congress provided that constitutional protection
to holders, we believe Congress intended a "quid pro quo", viz. the fair use of
that protected material by the public. We are highly concerned that there seems
to be no government defender of that public interest. On the contrary, the
National Commission on Libraries and Information Science latest report indi-
cates to us an acceptance of the inevitability of royalties or a licensing agree-
ment. It is no comfort to us that the Register of Copyrights, and the former
Registei', testified last week before this subcommittee that their first concern
is for the "beneficiaries" of the Copyright Office, i.e. authors and publishers. And
we are certainly not prepared to agree with the Register that the authors'
interest is necessarily the public interest.
Our apprehension about the vagueness of the term "systematic" is confirmed
by the report on S. 1361 (no. 93-983) which said ". . . neither a statute nor
legislative history can specify precisely which library photocopying practices
constitute the making of 'single copies' as distinguished from "systematic i-epro-
duction' ". The report's recommendation that meetings of opposing parties be
held to resolve the conflict reminds us that these meetings have already been
held many times, without success.
But surely, one asks, "systematic" is a term on which reasonable men can
reach an understanding? Aside from the fact that one man's reason is another's
intransigence, there is the fact that economics is at the root of the matter. Holders
of copyright understandably want more money, and libraries are faced with
rising costs in serAang the public. The economic damage to holders of copyright
is at best speculative, in regard to photocopying, and we share the view of the
U.S. Court of Claims that, in regard to medical journals at least, the argument
is an "untested hypothesis".^
Every organization, and hopefully, every liltrary, tries to operate in a "system-
atic" manner, i.e. according to standard operating principles or uniform prin-
ciples for each task, and must operate thus out of sheer common sense and
business necessity. When your office rents and uses a photocopy machine, you are
subscribing to a "system": even the production of single copies, no less multiple
copies, are part of a "system". In this respect, all library photocpying is "sys-
tematic" and thus subject to the restrictions of ijaragraph (g) (2), -*
As members of a profession, and employees of government agencies, devoted
to public service and the public interest, we ask you to strike from this proposed
legislation paragraph (g) (2) of Section 108, on grounds that this paragraph:
(a) contains a term so vague as lead to fruitless litigation,
(b) is against the public interest and the primary purpose of Article I,
Section S, of the U.S. Constitution, and
(c) is superfluous in the light of the remaining parts of Sections 107 and
108.
Statement of John B. Hightower, Chairman. Advocates for the Arts/
Associated Councils of the Arts
Mr. Chairman and members of the Committee : I am presenting this statement
on behalf of Advocates for the Arts, a program of Associated Councils of the
Arts, Inc. (ACA). ACA is a national service membership organization of state
and community arts agencies devoted to the protection and advancement of
the arts and artists. It represents several hundred widely diverse organizations,
ranging from The Metropolitan Opera, to the Alaska State Council on the Arts,
1 Annex. Special Library Sketchbook. S.L.A., N.Y. 1972. 45 p.
264
to the Fine Arts Council of Florida, to the Siouxland Arts Council of Sioux City,
Iowa. Through Advocates for the Arts, ACA is concerned with all of the prob-
lems that affect artists, art institutions, and the general public's enjoyment of
artistic and cultural works.
ACA acts as a service agency for its members, providing information and as-
sistance to arts councils and arts organizations throughout the United States. ACA
member organizations reflect all artistic disciplines and ACA speaks for the
management and financial sides of the art world, as well as the creative and
innovative artists themselves. Finally, ACA's Advocates program speaks for the
arts consumers — those who enjoy art, buy art, view art, and attend the perform-
ing arts — in short all who are concerned and affected by the cultural environment
of this country.
Advocates for the Arts, through factual and legal research, identifies areas
in which action might have a material impact on the rights of arts institutions
and individual artists, and areas in which public action might contribute to
the enhancement of the cultural life of the community. Advocates intends to
act with respect to these areas through public education, drafting of model
legislation and litigation. Advocates seeks to accomplish the sharpening of pub-
lic consciousness of the way in which law affects our cultural life and deter-
mines the aesthetic character of our surroundings.
Advocates have identified several areas of immediate concern. One of these
areas relates to the economic rights of the creative artists. My statement to you
today urges this Committee to take full cognizance of the significant adverse
impact on the arts which would result from copyright legislation which fails
to place reasonable restrictions on the permissible scope of photocopying copy-
right nxaterial.
The recent conclusion of the United States Supreme Court cas^ of Williams
and Wilkins Company vs. The United States where the Supreme Court by a
four to four deadlock let stand a lower court decision permitting rather wide
spread photocopying of copyright works, makes more immediate the need for
reasonable controls. Unfortunately, judging from the commentaries following
the United States Supreme Court decision, institutions feel they have an ex-
panding license to make widespread photocopy use of copyright works. While we
do not believe such license was necessarily created by the recent court decision,
it being limited to the specific facts presented, the climate is such that action
by this Committee is urgent and necessary.
We are concerned about the formulation of legislation which would formalize
the concept of "fair use" so as to encourage wholesale library reproduction and
distribxition of copyrighted works.
Those who create artistic works are necessarily threatened. Without copyright
protection against unauthorized distribution of photocopies of their created
works, creative artists can have no assurance of being paid for their efforts.
The language of HR 2223 (and S. 22 in the Senate) governing the "fair use"
of copyrighted material, if adopted, would be a major step toward the economic
protection for originators and creators of work from excessive reproduction. We
heartily endorse the provisions of Section 108 and urge its adoption by the 94th
Congress. Any attempt to erode or undermine the limitations on "systematic re-
production" of copyrighted works, will, in our opinion, greatly reduce the effec-
tiveness of the entire bill. We join the Authors League, and other intei-ested
parties, in urging the committee to resist any efforts to delete Section 108(g)
from HR 2223.
Unfortunately, the potential for harm to the creative artist from an overly
liberal photocopying provision is very real. Under the law as developed by the
Williams and Wilkins case, it appears that complete articles may be photocopied
from a magazine and distributed on a widespread basis without any royalty pay-
ment to the copyright owner. However, without specific limitations, we are fear-
ful that institutions will conclude if an article from a scientific journal can be
reproduced and distributed, why cannot a short story or a poem from a literary
magazine also be reproduced and distributed? Why not a musical composition
from a workbook of musical scores? Indeed, why not a photographic magazine or
a magazine anthology of art reproductions or lithographs? Why should the copier
be limited to magazines? Why should it not be permitted to reproduce the same
poem, short story, musical composition, photograph, drawing, or lithograph from
a paperback book or a hardcover book? Further, in the mind of the photocopier,
it might seem to be of no significance that the literary or artistic work is extracted
265
from a collection of works by a single poet, short story writer, composer, photog-
raplier, painter, or lithographer, or from an anthology of works by many artists.
In either case, an entire creative work would seem to be just as subject as an
entire article from a scientific journal to photocopying and mailing to members of
the general public. Instead of coming to the library personally to borrow and
read the work, the library will give to the "borrower" a permanent personal copy.
However, the composer, poet and short story writer are directly economically
dependent on royalty income, based on the sale of their works to those who desire
permanent personal copies. The photographer, the painter, and the lithographer
jealously reserve reproduction rights to their works and expect to be paid when
they authorize reproduction by or for those who desire permanent personal
copies.
If institutions will provide copies of specific works by creative artists upon
request, why should anybody buy the entire magazine or paperback or hardcover
book containing that specific work? Necessarily, publishers will sell fewer maga-
zines and books, artists will receive less royalty income, and their works will be
widely reproduced and distributed without authorization from them or compen-
sation to them.
Again, for emphasis, we are not saying that the Williams and Wilkins case
created such a broad license. However, that decision was the last authoritative
word on the subject of photocopying and has, we are fearful, created an atmos-
phere of photocopying promiscuousness.
In summary, we believe that an overly broad photocopying provision in the
copyright law would be inconsistent with the philosophy of the Constitutional
provision authorizing Congress to secure for authors copyright protection in
order to "promote the progress of science and useful arts." We therefore recom-
mend that adequate controls be placed on widespread photocopying of copyrighted
works so that we retain the incentive for the creative artists to produce the
art that is so necessary to the cultural environment of our country.
Statement of Dr. Ray Woodkiff, Department of Chemistry, Montana State
University
Enclosed is a letter I received from the Mosby Publishing Company concerning
HR 2223 and S 22, in particular sections 107 and 108, "Fair Use." and "School
and Library Photocopying." As an author, professor, analytical chemist and user
of duplicated copyright materials, I was very much alarmed at the effort and
money that is being spent to get an unworkable copyright law passed. Duplicating
machines will only become more numerous and available in the future and trying
to prevent copying of material will serve more to create disrespect for law than
it will to force people to buy books from publishers. If the publishers cannot
produce books cheaper than they can be duplicated on these machines, book pro-
ducers should improve their eflBciency, not force people to buy their books by
working to get a new copyright law passed.
In modern times, not to be able to duplicate a paragraph or a figure for class
use without going through a hopelessly complicated release or remuneration
system would stifle education and research in this country.
In closing, I very strongly urge you to amend or discard sections 107 and 108
of HR 2223 and S 22.
The C. V. Mosby Co.,
St. Louis, Mo., August 8, 1975.
Dr. Ray Alan Woodeiff,
Department of Chemistry,
Montana State College, Bozeman, Mon.
Dear Dr. Woodriff : Authors and editors are creative jieople ; the manner in
which you use knowledge and information to inform others is truly a creative
process. It is our opinion that these creative talents deserve to be protected.
The Copyright Law of 1909 has provided this protection, and as a consequence
your contributions when published have essentially not been used elsewhere
without permission.
The advent of copying machines has made it possible to reproduce virtually
everything in print. Because of this, and certain outmoded provisions of the
Copyright Law of 1909, the United States House of Representatives and Senate
Judiciary Committees are currently studying Copyright Revision Bills H.R. 2223
and S. 22. Action on these identical bills will be taken shortly.
57-780 — 70 — pt. 1 18
266
Of particular concern to us, and hopefully to you, are Sections 107 and 108,
"Fair Use," and "School and Library Photocopying."
It is our opinion that these sections of the proposed new law, as written, pro-
tect your creative efforts and our investment. These sections will restrict the
activities of those who feel that anything in print may be copied and distributed
as the copier sees lit — without the permission of, or compensation to, author and
publisher alike. We are strongly convinced that your creativity and our invest-
ment must be protected. The new law will provide this protection and yet allow
wide information dissemination.
Well organized efforts are presently attempting to amend Sections 107 and 108.
Such amendments will not provide safeguards against photocopying excesses as
outlined above. I am writing to ask your assistance in protecting what I believe
to be the correct position, one which truly serves everyone's best interests.
Attached is a list of House and Senate Judiciary Committee members. I am
asking you to contact these Committee members as well as your own Congress
persons. Your message need not be lengthy, but should emphasize these two
points :
1. Much time and effort are expended in producing manuscripts for publica-
tion. Sections 107 and 108 represent the result of delicate compromises worked
out by a number of groups, and if they are not tampered with, they will meet the
"fair use" needs of educators and librarians. If broadened to allow uncontrolled
and unrestricted use of copyrighted materials, they will discourage authors,
writers, and editors.
2. It is essential that we encourage, sustain, and reward the competitive inter-
play of ideas. If broader exemptions were to be added to Sections 107 and 108,
creative initiative would be stifled. The ultimate sufferer would be the intellec-
tual and imaginative life of the community.
In short, we believe Sections 107 and 108 of H.R. 2223 and S. 22 should be
adopted without change!
I would appreciate receiving a copy of your letter. If you wish additional in-
formation, I will be happy to supply it by return mail.
With thanks and best wishes, I remain
Cordially,
James B. Finn, Ph. D.,
Senior Vice President,
Research and Development.
We Avill now stand adjourned.
[^Vliereupon, at 12 :10 p.m., the subcommittee adjourned, to recon-
vene at 10 a.m., Thursday, May 15, 1975.]
COPYRIGHT LAW REVISION
THURSDAY, MAY 15, 1975
House of Representatives,
Subcommittee on Courts, CI^^L Liberties,
AND THE Administration OF Justice r
OF the Committee on the Judiciary,
Washington, D.O.
The subcommittee met, pursuant to call, at 10 :10 a.m. in room 2226,
Rayburn House Office Building, Hon. Eobert W. Kastemneier [chair-
man of the subcommittee] presiding.
1 Present: Representatives Kastenmeier, Danielson, Drinan, Patti-
son, Railsback, and Wiggins.
Also present : Herbert Fuchs and Bruce A. Lehman, counsels ; and
Tliomas E. Mooney, associate counsel. jj
]Mr. Kastenmeier. The committee will come to order for the pur-
pose of continuing the hearings on H.R. 2223, on copyright law
revision.
The Chair wishes to express gratitude to the gentleman from Cali-
fornia, Mr. Danielson, who presided yesterday, while Mr. Wiggins and
I were at the Rules Committee in connection with getting a bill out of;
the committee.
xllso, the Chair would like to say that it continues to be amazed at
the public interest in this question, as demonstrated by the number
attending the hearing. I am sorry that everybody cannot be seated.
This morning, we are interested in the question of educational uses,
other than public broadcasting. In this connection, we have divided
this morning's time, more or less, between advocates of educational
uses — let us call them educators for this simple purpose — and the
other half, by authors and publishers of materials used by educators.
I will also suggest that the House is in session; regretfully, we may
be interrupted for a brief period of time — 10 or 15 minutes — we may
have to recess for the purpose of making calls to the House for votes
or otherwise. We apologize, but this is an unusual circumstance, and
we tnist that all present will bear with us.
This morning I M'ould like to first greet as witnesses the following :
Mr. Sheldon Steinbach, staff counsel, American Council on Educa-
tion, and chairman. Ad Hoc Committee on Copyright Law Revision ;
Mr. Leo J. Raskind, professor of law, University of Minnesota ; and
Dr. Howard B. Hitchens, executive director, Association for Educa-
tional Communications and Technology ; Robert F. Hogan, executive
secretary. National Council of Teachers of English; Mr. Harry N.
Rosenfield, counsel. Ad Hoc Committee on Copyright Law Revision —
and vfho testified, as I recall, extensively in hearings 10 years ago ; and
Mr. Bernard Freitag, Council Rock High School, New Town, Pa.
( 267 )
268
He is accompanied by Dr. Harold Wigren, on behalf of the National
Education Association — and Dr. Wigren is remembered for his testi-
mony 10 years ago, in more or less the same field.
Gentlemen, you are all welcome.
May I, therefore, ask Mr. Steinbach to proceed first.
TESTIMONY OF SHELDON E. STEINBACH, STATT COUNSEL, AMERI-
CAN COUNCIL ON EDUCATION; CHAIRMAN, AD HOC COMMITTEE
ON COPYRIGHT LAW REVISION
Mr. Steinbach. Mr. Chairman, members of the subcommittee, I am
Sheldon Elliot Steinbach, staff counsel and assistant director of gov-
ernmental relations of the American Council on Education. I appear
before you today, however, representing the Ad Hoc Committee of
Education Organizations on Copyright Law Revision, a consortium
covering a wide spectrum of 39 organizations within the educational
community with interest in the revision of the copyright law. Most
lespecially, we represent the interests of teachers, professors, school
and college administrators, subject matter specialists, educational
broadcasters, librarians, and indirectly, students themselves. A list of
our members is attached to this statement. In addition, we support the
testimony given by the library associations yesterday. These groups
are also members of the ad hoc committee.
Our testimony today will be presented by four individuals repre-
senting several organizations within the ad hoc committee. Although
there is a fundamental ad hoc position, tlie interests of each constituent
group varies, and as such, they will emphasize in their testimony today
those matters of greatest concern to them. Furthermore, each group
under the ad hoc umbrella has reserved the right to determine its own
posture with regard to particular issues.
[List of members follows :]
Ad Hoc Committee on Copyright Law Revision
Agency for Instructional Television.
American Association of Colleges for Teacher Education.
American Association of Community and Junior Colleges.
American Association of Law Libraries.
American Association of School Administators.
American Association of School Librarians.
American Association of University Women.
American Council on Education.
; American Educational Theatre Association, Inc.
American Library Association.
Associated Colleges of the Midwest
Association for Childhood Education International.
Association for Computing Machinery.
Association for Educational Comunications and Technology.
Association of Research Libraries.
Baltimore County Schools.
Corporation for Public Broadcasting.
Council on Library Resources.
International Reading Association.
Joint Council on Educational Telecommumcations, Inc.
Medical Library Association.
Modern Language Association.
Music Educators National Conference.
Music Teachers National Association.
National Art Education Association.
National Association of Educational Broadcasters.
2(39
National Association of Elementary School Principals.
National Association of Schools of Music.
National Catholic Educational Association.
National Catholic Welfare Conference.
National Commission for Libraries and Information Science.
National Contemporary Theatre Conference.
National Council for the Social Studies,
National Council of Teachers of English.
National Education Association of the United States.
National Public Radio.
National School Boards Association.
Public Broadcasting Service.
Speech Communication Association.
Observers
American Association of University Professors.
American Home Economics Association.
American Personnel and Guidance Association.
Association of American Law Schools.
Association for Supervision and Curriculum Development.
Federal Communications Commission.
National Congress of Parents and Teachers.
Mr. Steinbach. I would like to add that the ad hoc committee will
not address itself today to the question of instructional broadcasting
because we have been assured that this matter will be considered at a
later date, at which time we will be given an opportunity to speak to
those issues.
It is my pleasure now to introduce Prof. Leo J. Kaskind, professor
of law, University of Minnesota, representing the Association of
American Law Schools, the American Association of University Pro-
fessors, and the American Council on Education — the Joint Copy-
right Committee for those three organizations.
[The prepared statement of Leo J. Kaskind follows:]
Statement of Leo J. Raskind, Made of Behalf of the Association of Ameri-
can Law Schools. American Associaton of University Professors, and the
American Council on Education
Mr. Chairman and members of the subcommittee, I am Leo J. Raskind, pro-
fessor of law at the University of Minnesota. I am chairman of the Special Com-
mittee on Copyright Law of the Association of American Law Schools ; I appear
here today on behalf of the Association of American Law Schools, the American
Association of University Professors, and the American Council on Education.
Among these three organizations, we account for some 6,000 law teachers and
some 7.5,000 other university professors. The American Council on Education is
an association of national and reg-ional education organizations and nearly 1,400
institutions of higher education.
We strongly urge that the doctrine of fair use be preserved and given formal
recognition by Congress, both by express statutory provision and by appropriate
language in the final Committee report.
Our position is grounded on the Constitutional directive to Congress contained
in Article I, Section 8, Clause 8, which provides :
The Congress shall have Power to promote the Progress of Science and useful
Arts, by securing for Limited Times to Authors and Inventors the exclusive Right
to their respective Writings and Discoveries.
The higher education community is the principal institution in our society
charged with the task of transmitting and advancing knowledge. It is our concern
with discharging this basic function of teaching and research that moves us to
ask for an effective statutory expression of the doctrine of fair use.
In making this proposal, I wish to emphasize that we do not seek to remove
protected material from the ambit of the Copyright statute. We are neither
adverse nor hostile to the basic premise that legitimate rights in intellectual
property merit protection and compensation. Indeed, we accept this premise as
270
a matter of principle, as a matter of public policy, as w^ll as a matter of self-
interest. There are among our membership authors whose works command liigli
prices in the commercial book market; many of our authors write for technical
journals without compensation.
Our main concern is to stress before this Committee the soundness of the tra-
ditional, judicially constructed doctrine of fair use and to illustrate its instru-
mental significance in the process of higher education.
As has been recognized throughout this extended process of revising the Copy-
right Law, a statutory recognition of the doctrine of fair use is preferable to
continued reliance upon case law development. As the Senate Report has recently
put it, ". . . there are few if any judicial guidelines. . . ." bearing directly on
the usage of teachers and libraries in the educational and research context
which is our concern. See, S. Rept. No. 93-983, 93rd Cong., 2d Sess. 116 (1974).
Given the paucity of decided cases in this area, it is necessary to recognize the
difficulty of leaving the resolution of this important problem solely to the limited
framework of existing decisions. We urge, therefore, the enactment of § 107, as it
now appears in H. 2223, 94th Cong., 1st Sess., as supported by adequate legisla-
tive history.
The recent decision of the Court of Claims in Williams d Wilkins Co. v. United
States, 487 F. 2d 1345 (Ct. CI. 1973), aff'd by an equally divided court, 43 U.S.L.W.
4314 (1975), underscores the significance of the fair use doctrine to the educa-
tional and research community. By its aflirmance of this Court of Claims opinion,
the Supreme Court has left the resolution of this problem to the Congress.
In seeking to have codified the traditional fair use doctrines, adequately sup-
ported by legislative history, we are moved by the primary importance of the
availability of copyrighted material to our teaching and research duties. First
and most basic is the fact that the higher education community on whose belialf
we appear today, consists of those institutions in our society charged with the
ultimate task of transmitting and advancing knowledge. I emphasize both re-
search and teaching; each function is indispensable to and supportive of the
other. Effective instruction of the next generation of citizens and professionals,
requires that the current generation of teachers be involved as researchers on the
frontiers of their own individual subject areas. If the individual teacher is to
discharge this fundamental research obligation, that teacher must be kept abreast
of the current developments within a given discipline. This necessarily requires
the teacher to have available the work product of allied researchers.
The exponential rate of growth of knowledge expressed in tangible form during
this generation, requires that this information be available to the teacher and the
scholar. As the volume of published material has risen, the library budgets of
colleges and universities are increasingly pressed. The typical library of a law-
school must expend a substantial portion of its annual budget merely to keep
current its holdings of state and federal reports as well as statutes, treatises,
and looseleaf services.
In its support of higher education, outside its concern with Copyright Law, the
Congress has recognized this basic financial constraint. Thus, in its 1972 amend-
ments to the Higher Education Act of 1965 (and related acts). Congress sup-
ported networks for the shared use of library materials (among other facilities).
Section 1033(a) of Title 20 U.S.C.A. (1974) provides as follows :
The Commissioner shall carry out a program of encouraging institutions of
higher education (including law and other graduate professional schools) to
share, to the optimal extent through cooperative arrangements, their technical
and other . . . resources. . . .
Subsection (b) designates such authorized projects of shared usages as
follows :
(1) (A) joint use of facilities such as . . . libraries, including law li-
braries . . . including joint use of necessary books. . . .
Against the background of this clear, prior expression favoring shared use,
we express our concern that § 108 (g) of H.R. 2223 is inconsistent with, and hos-
tile to, this stated desire of Congress.
We therefore urge this Committee to delete § 108(g) (1) and (2) from the
present measure because we believe it improperly limits and is inconsistent with,
the expression of the fair use doctrine contained in § 107 and the legislative his-
tory thereto. It is our recommendation that a period be placed after the phrase,
". . . separate occasions" in the first sentence of § 108(g) and that all language
subsequent thereto be deleted.
271
We oppose the enactment of §108 (g)(1) as presently proposed, because it
introduces an inarticulate and. troublesome concept of '•concerted reproduction" ;
we consider the reference to "systematic reproduction" in §10S (g)(2) to be
equally vague and troublesome.
It is significant that the Senate Report No. 93-983, 93d Cong., id Sess. 122
(1974), states of the identical text of § 108(g) which appeared in S. 1361:
However, neither a statute nor legislative history can specify precisely which
library photocopying practices constitute the making of "single copies" as dis-
tinguished from "systematic reproduction." [At p. 122.]
We urge that the legislative history to § 108 reflect this concern with unduly
limiting § 107. We object to the examples of ipermissible shared library usage
under § 108 offered in the above Senate Report, in that they are misleading. To
the extent that they would guide a court in the interpretation of the phrase
"systematic reproduction," this statement of legislative intent does so without
any reflection of the interest of the teacher and scholar to have basic material
made available. Moreover, the present expre.ssion of legislative purpose under-
lying § 108 makes no mention of the considerations of the Higher Education Act's
stated interest in shared usage.
It would be our preference that the text of the present § 108 be modified as we
have indicated above and that the legislative history of this provision reflect the
dual concerns of the teacher and scholar's need for the availability of published
materials as well as the Education Act's directive for shared usage. It seems
to us that the examples in the present Senate Report give little if any weight to
theS'e two basic considerations.
From the standpoint of the teacher and the researcher, the doctrine of fair use
must be enacted free of effective limitations on library practices. Availability of
library materials remains basic both to the teaching and research functions of
the higher education community. A teacher in a small private or public university
located in the Southeastern part of the United States, may find that a work
essential to a current research interest is to be found only at a univer.sity at some
distance to the Northeast. That teacher may need to obtain only one chapter of
a book or a faw pages of either a book or a periodical. Having such material
available is essential to the scholar. Inter-library lending has become a means of
making this information available. A definition of fair use which left uncertain
the availability of such material, even if photocopied, would frustrate the pur-
poses underlying both the fair use doctrine and the fundamental commitment to
provide and advance knowledge by the university community.
Accordingly we would request that the legislative history of § 108 (a) through
(f) clearly state the importance of the availability of library and archival mate-
rial to the teacher and the scholar.
Turning to the teaching function, the need for reasonable availability of copy-
righted material for classroom use is inextricably linked to the needs of the
scholar. Often a current news item or periodical article will bear directly and
immediately upon a topic scheduled for classroom discussion the next day. The
quality of teaching is greatly improved by making available to the students the
latest commentary about it while they are studying the topic. Denial of availabil-
ity of such copyrighted material would not serve the interest of copyright pro-
prietors. Students in the classroom situation are not potential subscribers to the
Bureau of National Affairs, Antitrust & Trade Regulation Report, for example,
or to the Prentice-Hall multi-volume Federal Income Tax Service, during their
tenure as students. Indeed, it is likely that having the benefit of a brief extract
from one of these services, complete with its full title, will advertise and acquaint
the student with the utility of these loose-leaf services.
To deny the classroom teacher the availability of such material will mean
only that the students will be without such current and timely material. Denial
of the use of this material will mean simply that the educational process will be
less well served and the copyright proprietor will be without even the benefit of
having the availability of this material brought to the attention of students.
We reiterate that we do not seek the right to engage in multiple copying out
of the context of research and teaching. We seek only the right of the scholar and
teacher to have available, subject to the limitations of tlie statutory fair use
doctrine, such copyrighted material as is germane to research and writing. And
we seek this availability in the public interest in the promotion and dissemina-
tion of education and scholarly pursuits. In taking this position, we recognize that
the effect on the potential market for the copyrighted material, is an appropriate
factor to be considered in the determination of fair use. We also recognize that
272
in the overwhelming proportion of eases, any possible adverse effect on the eco-
nomic interest of a proprietor will be nil or virtually so. On balance, such use of
excerpts is likely to stimulate the sales of the material in the long run.
We should like to draw the Committee's attention to the forthcoming studies
undertaken through the Copyright Office and the National Commission on Li-
braries and Information Science, of the library usage of copyrighted materials
both in the inter-library loan context as well as in meeting requests of scholarly
and research users. The feasibility of designing a "payments mechanism" for
such library uses is one aspect of this study.
It is our concern that a determination of the feasibility of some means of com-
pensation may serve to vacate the doctrine of fair use. We believe such a con-
clusion would do great harm to the public interest in the promotion of educa-
tion and scholarly activities. Moreover, such an outcome would inflict irreparable
harm on the educational community without conferring a derivative benefit on
copyright proprietors.
We thus advocate that the House Report which accompanies this measure,
be drafted to include an express reference to the effect that the doctrine of fair
use would be applicable to copyrighted materials which might subsequently be
designated as compensable, if photocopied for other uses. By clearly establishing
that teaching and research uses are signifieaut to the doctrine of fair use, subse-
quent uncertainty as to the treatment of library materials which might require
compensation if copied for other puri>oses, would be avoided.
We consider that Chapter 5 of H. 2223 sets out definitions of infringement and
remedies therefor, which are unduly restrictive of the doctrine of fair use in the
educational context.
Accordingly we urge modification of the present measure, as follows. First, we
urge that § 502(a) be modified by the addition of the following sentence, "No
temporary or final injunction shall be available against any library or user cov-
ered by § 108 or § 110."
In its present form, we believe § 502 ( a ) of the proposed measure would per-
mit the use of the injunction to undercut the effective access by teachers and
scholars to the fair use provisions. We would point to the withdrawal by Con-
gress of injunctive relief against collective organizational activity in the labor
relations arena by the Norris-LaGuardia Act, 47 Stat. 70 (1932) ; 29 U.S.C.A.
§ 101 (1973). It is our position that the parallel should carry over here. The sole
statutory framework controlling labor relations is the Labor Relations statutes
themselves. We urge that the fair use doctrines of the proposed measure be
enacted as the sole framework for governing the use of copyrighted materials
in the educational context by teachers and scholars.
Secondly, we consider that the damages provision of § 504(c) (2) also en-
croaches upon the fair use doctrine of § 107. We urge a change in the last sen-
tence of this provision beginning at line 13 on page 49. In line IS, we would prefer
that the reference to §107 be deleted in favor of the phrase, "§§107 through
117." Then we would urge that all language on line 18 after the phrase, "§ 107",
in the current version, be deleted. In its place we would urge the following final
language as follows : "there shall be neither statutory damages, nor costs, nor
attorneys fees."
TESTIMONY OF LEO J. RASKIND, PROFESSOR OP LAW, UNIVERSITY
OF MINNESOTA, REPRESENTING THE ASSOCIATION OF AMERI-
CAN LAW SCHOOLS, THE AMERICAN ASSOCIATION OF UNIVER-
SITY PROFESSORS, AND THE AMERICAN COUNCIL ON EDUCATION
Mr. Easkind. As Mr. Steinbach has said, Mr. Chairman and mem-
bers of the subcommittee, I am professor of law at the University
of Minnesota. I appear before you today on behalf of these organiza-
tions: The Association of American Law Schools, the American
Association of University Professors, and the American Council on
Education. We account, as a law school association, for some 6,000 law
teachers. The American Association of University Professors com-
prises some 75,000 other university professors. The American Council
273
on Education is an association of national and regional education
organizations, and nearly 1,400 institutions of higher education.
We appear before you because of our concern over the revision of
the doctrine of fair use in relation to our function. May I draw to
your attention, on page 2 of my statement, to the second paragraph:
we note above the constitutional directive contained in article I, sec-
tion 8, clause 8, of Congress' concern in this area of assuring to authors
and others the rights to their writings.
As the higher education community, we are the principal institution
concerned in this society with the task of transmitting and advancing
knowledge. It is for that use that we deem the problem of fair use of
copyrighted material as crucial to the discharge of this function.
As a classroom teacher with some 20 years' experience in law schools
and departments of economics, I am here to assert to you that without
the doctrine of fair use, adequately described in the statute, and
supported by articulate legislative history, what we do would be
greatly impeded without any derivative benefit to publishers and
others.
We use this material — and examples of our use suggests that the
students, who are the ultimate consumers of our concern as teachers,
are not, at the time that they are students, potential subscribers to
the journals for which protection is sought. Many of the journals —
Time magazine, for example — recognize the students' status by offer-
ing student subscriptions. Many learned journals offer subscriptions.
We are only asking through the doctrine of fair use, as researchers
and scholars, to advance Imowledge by having made available to us,
in the library context, materials which our libraries do not have,
no matter how good they are. The University of Minnesota has a
fine law library, but we do not have everything. On occasion it is
necessary for me, if I am writing an article, to have information from
other libraries. That is the main nub of our concern with the doctrine
of fair use. We think it is crucial for the discharge of our teaching
and research. We do not see that it infringes on the economic rights
of others.
I draw your attention, on page 2, in the third paragraph, that we
expressly recognize that we do not seek to have removed from cop;^-
right protection basic material under the statute. We accept this
premise as a matter of principle and a matter of public policy and
a matter of self-interest. As lawyers, we recognize case law and I draw
your attention, now, to the ne"xt-to-the-last paragraph on page 2 —
that the existing state of case law in this area isnot articulate, suflS-
ciently articulate, to deal with fair use and describe it.
Therefore, we urge that this revision process produce a statutory
doctrine of fair use and it be described by legislative history that
will aid the interpretation of it.
I point out to you further— I will not read this statement; I will
summarize it and make myself available to your questions — ^that
Congress has, itself, as I pomt out on the bottom of page 3, enacted
legislation suggesting such shared usaffe and recognizing that, as
researchers, our libraries do not have adequate resources and cannot
have adequate resources for every library to have a total collection
of all the material that is needed for teaching and research.
274
I draw your attention to Congress' joint- and shared-use provisions
in the Higher Education Act, section 1033.
Against this background, we have reviewed the proposed H.E.
2223 and found, as was pointed out to you yesterday, that, for example,
section 108(g) trenches and undermines the interpretation of section
107 that we would seek. The details of that, I leave to my statement.
I would draw your attention now to page 6 of my statement, and
to the second paragraph; the first and second paragraphs.
Our position is that to deny the classroom teacher the availability
of such copyrighted material, in the context of teaching and research,
would be to make the teaching and research process less fruitful, less
meaningful and less important to scholars; and to do so would not
benefit the economic interest of copyrights. We would simply do with-
out, if it were necessarj^, if we could not have access to this material.
We reiterate, as I say in the second paragraph on page 6, we do
not seek the right to engage in multiple copying outside the context
of research and teaching. We seek only the right of the scholar and
teacher to have available subject matter, subject to the limitations
of the statutory doctrine of fair use.
I will close now, and make myself available to your questions.
]Mr. Kastexmeier. Unless members are strongly disposed to do so,
I would urge they defer questions until each of the witnesses has
concluded; then you may ask questions of any of the witnesses who
have testified.
Mr. Steinbacii. I next would like to introduce Bernard J. Freitag,
Council Rock High School, New Town, Pa., on behalf of the National
Education Association; accompanied by Dr. Harold E. Wigren.
[The prepared statement of the National Education Association
follows :]
Statement of James A. Harris, President, National Education Association
I am James A. Harris, President of the National Education Association. The
NEA represents almost 1.7 million teachers in every state across the nation and
is the largest professional association in the United States. Its members are
active at all levels of education from early childhood through postseeondary and
adult. Thus, our interests cover the vphole spectrum of educational programs. We
appreciate the opportunity to present our views regarding the need to reform
copyright law and retain certain positive aspects of the present law, and to
comment on H.R. 2223.
The National Education Association is in favor of reform of the U.S. Copy-
right Law of 1009, but NEA will not support a law which deprives educators of
rights derived through long-established practice and which denies teachers and
students the right of reasonable access to both print and non-print materials for
purposes of teaching, scholarship, and research.
The NEA therefore opposes H.R. 2223 in its present form. It is a regressive bill
that curtails or repeals existing rights for education — rights which have been
established through the years. We object to H.R. 2223 on a number of grounds.
(A) The language of H.R. 2223 severely curtails the appUcaMlity of the "not-
for-profif concept in the present law and substitutes restrictive language that is
not acceptable in meeting the needs of education consumers. Under the not-for-
profit principle, a distinction is made between commercial and noncommercial
uses of materials — a distinction which we feel is valid and defensible and which
should be preserved in the new law. Educational users need special protection
over and above that provided commercial users because they have a public
responsibility for teaching the children entrusted to them. They work for people —
not for profit. They do not use materials for their own gain but for the benefit of
the children of all of our citizens, including those of authors and publishers.
275
Teachers therefore need the assurance that the present law's not-for-profit
principle, granting special exemptions for nonprofit uses of copyrighted materials,
will become part of the new law.
Section 110(1) of H.R. 2223 limits permissible uses of copyrighted materials to
face-to-face classroom teaching situations and would rule out closed-circuit in-
school uses as well as uses over dial- or remote-access system in schools, all of
which are designed to bring materials to learners rather than transport learners
to materials. Section 110(2) would restrict the transmission of instructional
television programs to "reception in classrooms or similar places normally de-
voted to instruction"' and would rule out the use of such programs in open learn-
ing situations in community store front learning centers or for high school or
postsecondary formal viewing situations in dormitories or at home. Education is
rapidly moving in the direction of providing many alternatives and options in
learning wherein school is becoming a concept rather than a place.
(B) The bill also fails to clarify the meaning of "fair use" as applied to the
uses of instructional materials hy teachers and students. The recent Supreme
Court decision in the Williams & Wilkins case validates our position that fair
use is unreliable at best and is, in the words of the Court of Claims, an "amor-
phous doctrine." The bill leaves it in that status. If eight Justices of the Supreme
Court are unable to reach agreement on whether a given use of a work is a fair
use. how can one expect a non-jurist to know? The language and rationale are
just as applicable against teachers and schools as against libraries.
The NEA does not condone "under-the-table" uses. It simply wants teachers
to have reasonable certainty that a given use of copyrighted work is permis-
sible so that they won't be afraid to use a wide variety of materials and
resoufces in the classroom.
The bill further fails to recognize custom and practice in education as a
proper basis for "fair iise," as was decided in the Williams & Wilkins case.
For many years teachers have been accustomed to certain classroom uses of
materials being unchallenged or unquestioned. For example :
A class is having difficulty undefstanding symbolism in literature, and the
class text does not go far enough in its explanation. The teacher therefore makes
multiple copies of a short poem or a short essay (from another book) that
Avould help the class imderstand the concept.
A foreign language teacher tapes a portion of a modem French poem and
asks students to verbalize the recor'ded portion and then tape it so they can see
the improvement of their accent.
An economics teacher reproduces 30 copies of graphs and chart;s from the
Wall Street Journal to study the stock market.
They consequently have assumed that such nses were legitimate. We argue
that custom can become law when it isn't questioned! This is particularly
true in cases where the law is ambiguous, as in the case of the fair use doc-
trine, where long-established and non-contested custom and practice has in
fact established a meaning for the statutes.
In this regard, the XEA is also concerned the bill still places the burden
of proof on the classroom teacher to prove that he or she has not infringed
copyright. The NEA believes strongly that this burden of proof should be
shifted to the alleger of the infringement, who has all the data involved in
all the criteria for fair* \ise which are specified in Section 107.
(C) This legislation further reduces accessibility now permitted through
the non-renewal of copyrights after 28 years. It does this by eliminating the
renewal requirement and by providing for dui'ation of life plus 50 years. This
is a curtailment of education's present rights of access because it unduly
extends copyright monopoly from "28 years plus a 28-year renewal period" to
approximately 75 years. Copyright Office records show that approximately 85
percent of copyrighted works have not been renewed after the initial 28-year
period, but have passed instead into the public domain. The unwarranted
extension of copyright in H.R. 2223 would protect the author's or creator's
Tieirs more than it would the author or creator himself or herself. We ask,
therefore, why the principle of free access to information so essential to a
free society should be sacrificed, especially when the author or creator him-
self or herself has not seen fit to renew the copyright. Many teachers who are
also authors tell us that they are as much — or even more — interested in seeing
their works used and their ideas disseminated as they are in receiving re-
muneration each time their works are used. The profit motive is not the only
motive that prompts an author or other creator to pr'oduce. There is also the
276
satisfaction that comes from getting one's ideas into the open for discussion
and debate, with the hope of finally seeing them adopted and thereby creating
a better life for others who follow.
In summary, the NEA will not be able to support a bill unless it — >
Retains and clarifies an overall not-for-profit concept for educational, schol-
arly, and research uses and copying, whether couched as a limited educational
exemption or in some other suitable comprehensive form ;
Clarifies the meaning of fair use as applied to teachers and learners ;
Shifts the burden of proof from the teacher to the alleger of the infringement.
NEA therefore urges the adoption of language by this committee that en-
compasses the above-stated concepts and makes copyright reform meaningful
for the teachers, scholars, researchers, authors, and publishers who create,
transmit, and perpetuate our heritage for future generations.
TESTIMONY OF BERNARD J. FREITAG, COUNCIL ROCK HIGH
SCHOOL, NEW TOWN, PA., ACCOMPANIED BY HAROLD E. WIGREN,
ON BEHALF OF THE NATIONAL EDUCATION ASSOCIATION
Mr. Freitag. Mr. Chairman, members of the subcommittee, I am
Bernard Freitag, teacher of German and foreign language department
chairman at the Council Rock High School, New Town, Pa.
I am appearing on behalf of President James A. Harris, President
of the National Education Association.
With your approval, I am skipping the fii-st two paragraphs. I now
request that the entire statement appear in the record.
The NEA opposes H.E. 2223 in its present form. It is a regressive
bill that curtails or repeals existing rights for education — rights
which have been established through the years. We object to H.R.
2223 on a number of grounds.
(A) The language of PI.R, 2223 severely curtails the applicability
of the not-for-profit concept in the present law and substitutes re-
strictive language that is not acceptable in meeting the needs of
educational consumers. Under the not-for-profit principle, a dis-
tinction is made between commercial and noncommercial uses of
materials — a distinction which we feel is valid and defensible and
which should be preserved in the new law. Educational users need
special protection over and above that provided commercial users
because they have a public responsibility for teaching the children
entrusted to them.
They work for people, not for profit. They do not use materials
for their own gain, but for the benefit of the children of all of our
citizens, including those of authors and publishers. Teachers there-
fore need the assurance that the present laAv's not-for-profit principle,
granting special exemj^tions for nonprofit uses of copyrighted ma-
terials, will become part of the new law.
Section 110(1) of H.R. 2223 limits permissible uses of copyrighted
materials to face-to-face classroom teaching situations and Avould
rule out closed-circuit in-school uses as well as uses over dial- or
remote-access systems in schools, all of which are designed to bring
materials to learners rather than transport learners to materials.
Section 110(2) would restrict the transmission of instructional tele-
vision programs to recejDtion in classrooms or similar places normally
devoted to instruction and would rule out the use of such programs
in open learning situations in community storefront learning centers
or for high school or postsecondary formal viewing situations in
277
dormitories or at home. Education is rapidly moving in the direction
of providing many alternatives and options to learning wherein
school is becoming a concept rather than a place.
(B) The bill also fails to clarify the meaning of fair use as applied
to the uses of instructional materials by teachers and students. The
recent Supreme Court decision in the Williams <& Wilkins case
validates our position that fair use is unreliable at best and is, in the
words of the Court of Claims, an amorphous doctrine. The bill leaves
it in that status. If eight Justices of the Supreme Court are unable
to reach agreement on whether a given use of a work is a fair use,
how can one expect a non jurist to know? The language and rationale
are just as applicable against teachers and schools as against libraries.
The NEA does not condone "under the table" uses. It simply wants
teachers to have reasonable certainty that a given use of copyrighted
work is permissible so that they will not be afraid to use a wide variety
of materials and resources in the classroom.
The bill further fails to recognize custom and practice in education
as a proper basis for fair use, as was decided in the WilliaTns c&
Wilkins case. For many years, teachers have been accustomed to cer-
tain classroom uses of materials being unchallenged or unquestioned.
For example : A class is having difficulty understanding symbolism in
literature, and the class text does not go far enough in its explanation.
The teacher therefore makes multiple copies of a short poem or a
short essay — from another book — ^that would help the class understand
the concept.
Allow me to give some personal examples :
Teachers in my department make synchronized tape presentations
for classroom use. The basis of those slide tape presentations are, by
and large, their own materials : Pictures taken on their own trips. How-
ever, some specific items may not be available to the teacher, because
you need special permission to get access to the area, or perhaps the
pictures taken by the teacher did not turn out quite as well as could
be desired. In such an instance, the teacher may prefer to take a
picture from the available magazine, make a slide of it, incorporate it
right into the slide tape program.
Another example, dealing with foreign exchange values, dealing
with the currency of a given country : On the day that that topic may
come up, the teacher would perhaps make copies, 30 copies, of the
foreign exchange rates of the previous day in order to help the chil-
dren make the decision on what the daily rate concerning the story at
hand, or topic at hand, would be for, say, marks, shillings, or Swiss
francs.
Teachers, consequently, have assumed that such uses were legitimate.
We argue that custom can become law when it is not questioned. This
is particularly true in cases where the law is ambiguous, as in the case
of the fair use doctrine, where long-established and noncontested
custom and practice has in fact established a meaning for the statutes.
In this regard, the NEA is also concerned that the bill still places
the burden of proof on the classroom teacher to prove that he or she
has not infringed copvright. The NEA believes strongly that this
burden of proof should be shifted to the alleger of the infringement,
who has all the data involved in all the criteria for fair use which are
specified in section 107.
278
(C) This legislation further reduces accessibility now permitted
through the nonrenewal of copyrights after 28 years. It does this by
eliminating the renewal requirement and by providing for duration of
life i^lus 50 years. This is a curtailment of education's present rights
of access because it unduly extends copyright monopoly from 28 years
plus a 28-year renewal period to approximately 75 years. Copyright
Office records show that approximately 85 percent of copyrighted
works have not been renewed after the initial 28-year period, but have
passed instead into the public domain. The unwarranted extension of
copyright in H.R. 2223 would protect the author's or creator s heirs
more than it would the author or creator himself or herself. We ask^
therefore, why the principle of free access to information so essential
to a free society should be sacrificed, especially when the author or
creator himself or herself has not seen fit to renew the copj^right. Many
teachers who are also authois tell us that they are as much — or even
more — interested in seeing their works used and their ideas dissem-
inated as they are in receiving remuneration each time their works are
used. The profit motive is not the only motive that prompts an author
or other creator to produce. There is also the satisfaction that comes
from getting one's ideas into the open for discussion and debate, with
the hope of finally seeing them adopted and thereby creating a better
life for others who follow.
In summary, the NEA will not be able to support a bill unless it
(1) retains and clarifies an overall not-for-profit concept for educa-
tional, scholarly, and research uses and copying, whether couched as a
limited educational exemption or in some other suitable comprehen-
sive form; (2) clarifies the meaning of fair use as applied to teachers
and learners; and (3) shifts the burden of proof from the teacher to
the alleger of the infringement.
NEA therefore urges the adoption of language b}^ this committee
that encompasses the above-stated concepts and makes copyright re-
form meaningful for the teachers, scholars, researchers, authors, and
publishers who create, transmit, and perpetuate our heritage for future-
generations.
Mr. Chairman, I would like to submit for the record the ad hoc
committee's proposal on the exemption.
Mr. IvASTENMEiER. Witliout objectiou, that proposal will be received
and be made part of the record.
[The material referred to follows :]
Ad Hoc Committee's Proposal for Limited Edttcationai, Exemption; Limita-
tions ON Exclusive Rights : Reproduction for Teaching, Scholarship and
Research
Notwithstandin;? other provisions of this Act, nonprofit use of a portion of a
copyrighted work for noncommercial teaching, scholarship and research is not an
infringement of copyright.
For purposes of this section :
(1) "Use" shall mean reproduction, copying and recording: storage and re-^
trieval by automatic systems capable of storing, processing, retrieving, or trans-
ferring information or in conjunction with any similar device, machine or process ;
(2) "Portion" shall mean brief excerpts (which are not substantial in length-
in proportion to their source) from copyrighted works, except that it shall also
include (a) the whole of short literary, pictorial and graphic works; (b) entire-
M^orks reproduced for storage in automatic systems capable of storing, processing,
retrieving, or transferring information or in conjunction with any similar device^
machine or process, provided that
279
(i) A method of recording retrieval of tlie stored information is established
at the time of reproduction for storage, and
(ii) The rules otherwise applicable under law to copyrighted worlis shall
apply to informtion retrieved from such systems ;
(c) Recording and retransmission of broadcasts within five school days after
the recorded broadcast ; provided that such recording is immediately destroyed
after such 5-day period and that such retransmission is limited to immediate
viewing in schools and colleges.
Provided that "portion" shall not include works which are
(a) Originally consumable upon use, such as workbook exercises, problems,
or standardized tests and the answer sheets for such tests ;
(b) Used for the purpose of compilation within the provisions of Section
103(a).
Mr. Steinbacii. I would next like to introduce Dr. Howard B.
Hitchens, executive director, Association for Educational Commu-
nications and Technology.
[The prepared statement of Howard B. Hitchens follows :]
Statement of Howard B. Hitchens, Executive Director, Association for
Educational Communications & Technology
The Association for Educational Communications and Technology represents
eight thousand educators whose professional commitment is directed at finding
technological solutions for the wide range of educational problems. It is im-
portant to note here that we regard technology as far more than a collection
of educational machines and materials. Technology represents a systematic
approach to practical problems that emphasize the application of relevant
researcli. Professionals in my field occupy any number of roles — whether
ifs directing media programs ; developing specific instructional materials for
classroom or individual use; assisting teachers or others in selecting mate-
rials to meet a specific educational objective ; evaluating materials ; identify-
ing long-range educational objectives and developing long-range plans to meet
these objectives. Our members with this wide variety of jobs are employed in
schools and colleges; in the Armed Forces and industry, and in museums,
libraries aiid hospitals throughout the country.
Because they are so involved in the use of technology and modern commu-
nications, AECT members have run head-on into the 1909 copyright law which
provides few answers for them in liow they can use copyrighted materials.
And the problem becomes more difficult as media professionals find themselves
placed increasingly in the role of "copyright expert" for their institution. Be-
cause media professionals play such a vital role in education planning and
materials selection, school administrators are turning to them to answer the
complex copyright questions that arise daily in modern educational settings.
So AECT, as an association, is vitally concerned with the future of the bill
you are considering today. We have spent much time and energy trying to
determine the needs of education in relation to a new copyright law, but have
come to realize that we cannot look at the needs of education in isolation.
Since we are dependent to a great extent on the output of producers of edu-
cation materials, we must take their needs into consideration.
There is little doubt that the success of each group — educators and pro-
ducers— depends upon the support of the other. If the educators do not utilize
instructional materials, the producers surely cannot remain in business. Tlie
teacher, media professional, and the librarian create markets for an author's
work and give them visibility. Likewise, in this day of individualized instruc-
tion, the open classroom, ungraded schools, and student self-evaluation, the
successful educator— teacher, librarian, curriculum developer — wants to utilize
a wide range of learning resources. Certainly, when producers and users can
act in concert, the student reaps tlie benefits.
In considei-iug the needs of both sides — educators and producers — AECT
has adopted a position relative to copyright that we feel serves both groups.
AECT endorses with one exception the fair use provisions outlined in Section
107 and the accompanying legislative history. The full text of our position
paper follows. Particular attention should be paid to the third and fourth
paragraphs, which deal with the issue of "fair use."
280
[H.R. 2223]
Copyright Law Revision : A Position Paper by The Association fob
Educational Communications and Technology
The members of the Association for Educational Communications and Tech-
nology (AECT) believe that technology is an integral part of the teaching-
learning process and helps to maximize the outcomes of interaction between
teacher and pupil.
Regulations governing United States Copyright were originally developed
to promote the public welfare and encourage authorship by giving authors
certain controls over theii' work. It follows that revisions in Title 17 of the
United States Code (Copyrights) should maintain the balance between pro-
viding for the compensation of authors and insuring that information remains
available to the public. Some of the revisions proposed in S. 22 and H.R. 2223
lose sight of this balance between user and producer.
AECT endorses the criteria to be used in the determination of "fair use"
as contained in Section 107 of the proposed bill :
Section 107. Limitations on exclusive rights : Fair use
* * * the fair use of a copyrighted work, including such use by repro-
duction in copies or phonorecords, or by any other means specified by
(Section 106), for purposes such as criticism, comment, news reporting,
scholarship, or research, is not an infringement of copyright. In deter-
mining whether the use made of a work in any particular case is fair use
the factors to be considered shall include :
(1) The purpose and character of the use ;
(2) The nature of the copyrighted work ;
(3) The amount and substantiality of the portion used in relation to
the copyrighted work as a whole ; and
(4) The effect of the use upon the potential market for or value of the
copyrighted work.
However, we propose that the concept of "fair use" should apply equally to the
classroom teacher and media professional — including specialists in audiovisual
and library resources. Media personnel are becoming increasingly important mem-
bers of educational planning teams and must have the assurance that they may
assist classroom teachers in the selection of daily instructional materials as well
as with long range curriculum development. Classroom teachers do not always
operate "individually and at (their) own volition." The fact that the media pro-
fessional makes use of advance planning and has knowledge aforethought of the
materials he prepares for the teacher should not invalidate the application of the
"fair use" principle.
Concerning the use of copyrighted works in conjunction with television, AECT
proposes that "fair use," as it has been outlined above, should apply to educa-
tional/instructional broadcast or closed-circuit transmission in a non-profit edu-
cational institution, but not to commercial broadcasting.
Once the doctrine of "fair use" has been established in the revised law, negotia-
tions should be conducted between the proprietor and user prior to any use of
copyrighted materials that goes beyond that doctrine. We believe that the enact-
ment of the "fair use" concept into law prior to negotiations will guard against the
erosion of the concept. Generally, a reasonable fee should be paid for uses that
go beyond "fair use," but such fee arrangement should not delay or impede the
use of the materials. Producers are urged to give free access (no-cost contracts)
whenever possible.
We agree with the Ad Hoc Committee of Educational Organizations and Insti-
tutions on Copyright Law Revision that duration of copyright should provide
for an initial period of twenty-eight years, followed by a renewal period of
forty-eight years, whereas the proposed bill sets duration at the "life of the
author plus fifty years." It seems reasonable that provisions should be made to
permit those materials which the copyright holder has no interest in protecting
after the initial period to pass into the public domain.
Regarding the input of copyrighted materials into computers or other storage
devices by non-profit educational institutions, we agree with the Ad Hoc Com-
mittee that the bill should clearly state that until the proposed National Commis-
sion on New Technological Uses of Copyrighted Works has completed its study,
such input should not be considered infringement. The proposed bill states only
that ". . . (Section 117) does not afford to the owner of copyright in a work any
281
greater or lesser rights with respect to the use of the work in conjunction ^Yith
automatic systems . . ."
A new copyright law that both users and producers can view as equitable
depends upon the mutual understanding of each other's needs and the ability to
effectively work out the differences. We will participate in the continuing dialogue
with the Educational Media Producers Council and similar interest groups to
establish mutually acceptable guidelines regarding the boundaries of "fair use,"
and reasonable fees to be paid for uses beyond "fair use." This dialogue will be
especially important in the area of storage, retrieval, and/or transmission of
materials during the time period prior to the issuance of the report of the
National Commission on New Technological Uses of Copyrighted Works.
We feel that the above modifications of S. 22 and H.R. 2223 are needed to insure
that the revised law assists rather than hinders teachers and media specialists
in their v,"ork.
Our major concern with fair use is that in studying the legislative history of
the doctrine, fair use does not seem to apply equally to media professionals as
to teachers. The previous House and Senate reports identify '•spontaneity" of the
use as an important determinant as to whether a use is fair or not. Fair use
is extended to a classroom teacher who "acting individually and at his own- voli-
tion makes one or more copies for temporary use by himself or his pupils in the
classroom." However, classroom teachers do not always act individually or at
their own volition. They are frequently assisted by media professionals with the
selection of daily instructional materials as well as long range curriculum de-
velopment. The fact that a media professional is frequently not classified as a
"classroom teacher" and is sometimes even classified as "administration" should
not prevent him from continuing his role in the instructional process. We are not
siif/ocsting that any rights beyond "fair use" te extended to media professionals,
(inhj that they be alloived as much freedom as other education professionals.
We are currently working with others interested in this problem and will present
alternative language to this subcommittee in the near future.
Even though wesupport the enactment of Section 107 with suggested changes,
we realize that it will not solve the daily dilemmas faced by media professionals,
teachers, and librarians. AUDIOVISUAL INSTRUCTION, a magazine published
by my association, features a monthly column entitled "Copyright Today" that
demonstrates the confusion over the bounds of fair use. The column (several
reprints are attached) features copyright questions posed by readers with answers
suggested by copyright exi^erts, usually including at least one educator and one
producer. As you can see from the examples, there are frequently as many answers
to a given question as there are copyright experts.
Take the following question from the November 1974 issue of Audiovisual
Instruction :
Question. Two teachers in this district are preparing audio tutorial packages
for the fifth grade botany unit. They found five pictures they need in a color
film owned by the district. They want to make slide copies of the five frames.
Two copies of each slide is required. Would this be a violation of the copyright
law?
There are two opinions as to the legality of this action provided in the article —
one by an educator, the other by a representative of the producers. The educator
felt the situation cited may be beyond fair use because more than one copy
would be made and the copying would be done by someone (the media profes-
sional) other than a classroom teacher. The producers' representative states
that the situation would fall within "fair use."
As I said we realize the enactment of Section 107 will not solve our problems.
Even with the guidelines provided in that Section it is still diflicult to deter-
mine what is fair use and what is not. And if an educator is not able to deter-
mine if the proposed use is fair and feels that permission to copy should be
obtained in order to remain safely within the bounds of the law, how does he
or she get permission from a publisher or producer to use the material?
Requesting permission to use copyrighted materials is currently a long and
frequently tedious process for educators. An attached article entitled "Copy-
right As It Affects Instructional Development" (Audiovisual Instruc-
tion. December 1974) demonstrates the problems of contacting numerous
producers with no predetermined procedures. Perhaps this problem could be
solved by establishment of a clearinghouse either governmental or privately
operated. Certainly this would make it easier for an educator if he or she
has to contact only one source for permission rather than trying to deal with
57-786— 76— pt. 1 19
282
numerous producers all Avith different procedures. But even a clearinghouse
arrangement will still result in much time spent in waiting for reply.
We feel this delay, even if it is only (ideally) a week or so, might be detri-
mental to the teaching/learning process. It doesn't allow the education profes-
sional to take advantage of the "teachable moment." For example, on the day
following a speech by a noted individual, a teacher may want to use the copy
of the speech that appears in the local paper for reproduction and distribution
to a speech class for critique. Clearly, if the teacher had to wait several weeks
for permission to use the text, the impact of involving students in current
events would be lost. So in many instances, some means other than a clearing-
house must be used.
AECT has spent many hours working with producers in an attempt to work
out guidelines that would assist educators in upholding the copyright law.
We have come increasingly to the conclusion that the best means of solving
the problem is by developing voluntary licensing agreements between educators
and producers. Such agreements would allow a pre-determined amount of copy-
ing, kind of copying, or maybe even unlimited copying either for no charge or
for a pre-determined fee. Such an agreement would set the bounds of fair
use in advance and would also allow educators to take advantage of the "teach-
able moment."
We are not asking you, the Congress, to legislate a licensing agreement. It
would be almost impossible to include every possible type of necessary agree-
ment in legislation. We think we as educators must take the responsibility to
work with producers of materials to develop such agreement. AECT has had
and will continue to have dialogue with producers of materials in an attempt
to satisfy the needs of both groups. We are asking only support and encourage-
ment from the Congress to both sides to sit down and develop licensing
agreements.
The AECT position which has been presented in this testimony has been well
received by both educators and materials producers. Representatives of both
these communities viewed the position as a realistic step toward resolving the
issue of defining the limits of fair use. The statement is viewed by members
of each group as offering protection to educators that is not offensive to the
producers.
We think the incorporation of the AECT position into H.R. 2223 and its
legislative history is essential to the development of a new copyright law
that is equitable to educators and creators of materials alike.
I wish to thank the Subcommittee for this opportunity to present our views.
I only hope we can impress upon you that we are as concerned as you are with
the necessity for a new copyright law that will allow us as education profes-
sionals to continue the improvement of education through the application of
new technology and communications.
[Reprinted from Audiovisual Instruction, published by the Association for Educational
Communications and Technology, November 1974]
Copyright Today
(By Jerome K. Miller*)
This column is open to all readers of Audiovisual Instruction. News items
and questions about copyright which are of general interest will be included
as space permits. The identity of individuals submitting questions to this
column will be held in the strictest confidence. Please send all news items
and questions to Jerome K. Miller, Chairman, AECT Copyright Committee,
1025 Adams Circle, No. 2B, Boulder, Colorado 80303. It is impossible for the
editor to respond directly to questions about copyright.
COPYEIGHT BILL IN THE SENATE
Preceding consideration of the Copyright Revision Bill (S. 1361) by the full
Senate, it was considered and approved by the Senate Judiciary and Commerce
Committees. The reports from these Committees (S. Rpt. #93-983 from the
Judiciary Committee, and S. Rept. #93-1035 from the Commerce Committee)
♦Jerome K. Miller is assistant professor of Instructional media, Central Washington
State College, Ellensburg. He is currently on leave to pursue doctoral studies at the
University of Colorado.
283
are lielpful in uuderstanding the Congressional intent behind the bill. Copies
of the reports are available, free of charge, from the Senate Documents Room,
U.S. Capitol, Washington, D.C. 20510. Please include a self-addressed label with
your request. Your Senator can also assist you in obtaining copies of the report.
The text of the Senate bill is included in the report.
Educators will be especially interested in the bill's definition of "fair use"
copying. The bill defines it to include: 1) the purpose and character of the use;
2) the nature of the copyrighted work; 3) the amount and substantiality of
the portion used in relation to the copyrighted work as a whole; and 4) the
effect of the use upon the potential market for or value of the copyrighted
work. The accompanying Judiciary Committee report states : "The fair use
doctrine in the case of classroom copying would apply primarily to the
situation of a teacher who, acting individually and at his own volition, makes
one or more copies for temporary iise by himself and his pupils in the class-
room. A different result is indicated where the copying was done by the edu-
cational institution, school system or larger unit or where copying was
required or suggested by the school administration, either in special instances
or as part of a general plan."
AECT has opposed this interpretation and proposes that "fair use" should
apply equally to the classroom teacher and media professional. AECT has also
urged that the "fair use" principle should apply both to the selection and prep-
aration of daily instructional materials as well as with long-range curriculum
development.
Even if S. 13G1 is approved by the Senate in the near future, there is little
chance that the House will begin consideration of copyright revision until next
year. However, any bill approved by one House of Congress this year could carry
considerable weight in future consideration of the subject.
QUESTIONS & ANSWERS
Question. Two teachers in this district are preparing audio tutorial packages
for a fifth grade botany unit. They found five pictures they need in a color film
owned by the district. They want to make slide copies of the five frames, two
copies of each slide are required. Would this be a violation of the copyright law?
Answer 1 : If the "color film owned by the district" is a commercial copy-
righted product, this could be interpreted as a violation unless permission were
sought in advance from the copyright holder. Ownership of the prints by the
district does not automatically include duplication rights. The danger points
in this case which could be interpreted as a violation of fair use are: 1) the
creation of more than one copy, and 2) by someone other than the classroom
teacher.
Eugene H. White,
Director of Audio-Visual Services, Los Angeles City Scliools.
Answer 2 : In this situation there is illustrated a fairly good example of a
practice falling within the doctrine of fair use. Taking into consideration the
particular use to be made of the individual film frames, and the number of
frames actually being copied. EMPC feels that this ought to be defined as fair
use. The danger in this practice, however, could result if multiple copies of
the frames are then reproduced for use in the classroom which will utilize the
materials.
Ivan R. Bender,
Chairman, Copyright Committee, Educational Media Producers Council.
Question. One of our teachers recently asked the district IMC staff to make
30 copies of a chapter of a book in the school library. The chapter describes
the impeachment of President Andrew Johnson and was needed for a current
events class. We were assured that the materials would only be used once. Is this
a violation of the copyright law, and would it be a violation under the pro-
posed law?
Answer 1 : In this situation fair use would not apply because of the fact that
30 copies are being made of the chapter from this book. Multiple copying, even
if it involves only excerpts from a work, is generally regarded as falling outside
the scope of fair use. The question of the number of times that these copies would
be used would relate only to the question of the amount of damages which might
be granted to the copyright holder.
Ivan R. Bender,
Chairman, Copyright Committee, Educational Media Producers Council.
284
Answer 2 : This should not be considered fair use, and thus ^YOuld be a viohition
not be considered a precedent in this case, since the decision there favored gov-
ernmental libraries making large numbers of copies of copyrighted material.
Under Sec. 108 of the proposed legislation, it is legal for a library (which would
be interpreted as to include IMCs) "to produce no more than one copy ... of a
work , . ." ; therefore, such reproduction would be illegal under the proposed law
as well. „
Harold E. Hill,
Professor of Communication, Head, Radio-TV -Film, University of Colorado.
Answer 3 : The length of the copied chapter in relation to the entire book is an
important criterion in determining fair use. But basically, the making of multiple
copies of any length without permission of the copyright owner exceeds fair use
and is thus a violation. If the teacher had computed the real cost of making
photocopies, including the administrative time involved and the cost of paper,
he (or she) probably would have concluded that it was cheaper to order reprints
from the publishers.
Susan Engelhaet,
Staff Director, Copyright & International Trade,
Association of American Publishers, Inc.
[Reprinted from Audiovisual Instruction, published by the Association for Educational
Communications and Teclinology, December 1974]
Copyright Today — Copyright As It Affects Instructional Development
(Jeanne Masson Douglas*)
{Ms. Douglas' article appears here this month because of its appropriateness
to the December theme, "Instructional Developmeiit." The regular "Copyright
Today" column will resume icith the January issue.)
One of the major responsibilities of the instructional developer is that of mak-
ing instructional materials available in an appropriate medium. Materials are
often not useful in their existing forms ; they may have to be altered to fit
specific course objectives, to accommodate a preferred instructional mode such
as independent study or inter-active instruction, or simply to provide multiple
copies. Whatever the reasons for wanting to modify commercial instructional
media, the copyright issue is unavoidable, and obtaining copyright clearances
often becomes the responsibility of the instructional developer.
Having been involved for the last five years in instructional development ac-
tivities, either in a management role or as a consultant. I have accumulated
considerable data related to acquiring copyright clearances. During this time,
I have communicated with several publishers, producers, chairmen of national
associations and organizations, and even with pi-esidents of private corporations
in attempts to obtain permissions to reproduce their materials. The results have
been interesting, and at times, surprising.
In my early attempts as a copyright agent, I made use of a form letter. I soon
learned that this technique was getting only delayed responses or no response
at all. An original letter for each transaction was found to be much more success-
ful. Every letter had two things in common, however : the specification that the
media we produced would be used only within our own institution, and that the
materials would be used by our students only. (Sometimes phone calls have been
necessary to prompt a response but, since I never make a duplication permission
agreement except in writing, a written document is ultimately needed.) To dem-
onstrate good faith in complying with the "fair use" principle, I always explain
the purpose and effect of the use of the reproduced material, the quantity needed,
and the nature of the reproduction.
My respondents have been of an amazing variety. At times, I have been fortu-
nate to deal with someone known as the Rights and Permissions Officer or the
Contract and Copyright Officer, or even the Product Development Director. On
other occasions, I have been directed to the Public Relations Officer or the
n«^i^^"?f^ Masson Douglas is director. Educational Resources Center, Reading Area
Community College, Reading, Pennsylvania.
285
Editor-in-Cliief. Often, it has been necessary to negotiate with the Vice-President,
Executive vice-president, or the President of a firm. On one occasion, the pro-
ducer concerned would not communicate except through his lawyer. .,, .
Vnother variation which keeps things interesting is what I have decided to
call pasSng-the-buck''. For example, a New Jersey distributor referred me t.> a
Salifonita producer who referred me to a New York photographer. And a mid-
westei" publisher referred me to the copyright holder, who happened to be based
Tn Japan (Actually, this latter transaction took less time, in terms of number
of mail davs. than manv more localized arrangements.)
"s vaded as the respondents are the responses themselves. These have ranged
fror^ he law firm's "no . . . and furthermore . . ." to the following: "I am happy
ti gmnt vou permission ... I will also be pleased to supply lists of other materials
that you may wish to consider for y(mr programs . . ." and "I appreciate your
courtesy in i^equesting permission. Thank you for asking. I ^^''^^ ,T'%lTVn^]?cl^
in designing and developing improvements in your curriculum. One Producer
scoldedt via telephone, '"Why did y.ui ask? Why didn't you just go down be^hind
the barn and do it?" In extreme contrast to this attitude, however, is that of the
publisher who sends along a printed copy of the company's policy statement re-
lated to copyright. One New York film producer responded to my letter with a
telephone call, explaining that he was willing to grant permission verbally but
Avould not "put it in writing because of possible complications. Again in contrast,
a New Jersev publisher responded with a Permission to Reprint form which 1
had to complete in triplicate. An Illinois media producer responded. Enclosed
is our duplication policy statement to accommodate those making legitimate re-
quests and to inform those duplicating illegally that a policy does exist. Dealers
are asked to make positive identification of known illegal duplicators.
A review of some specific examples of clearance policies is helpful, lor the
sake of clarity, I will categorize by media type.
PRINT MATERIALS
Print > Print
A New York publisher granted permission to make 500 copies of a short story
for a $12 fee and use of a credit line on each copy.
A New Jersey publisher granted permission to reproduce a series of tests.
A Colorado publisher would not grant permission to duplicate an article because
reprints were available at 50^ each.
Print '> Is: on-Print
An 'Ohio publisher granted permission to copy pages from a dictionary and a
thesaurus as slides. , , .„ . i.- t
A New York pulilisher granted permission to convert all the illustrations ot a
hook to slides and the text to tape.
An Illinois manufacturer granted permission to copy as slides all the illustra-
tions in a textbook.
A New Jersey manufacturer granted permission to copy all the illustrations
of three of their books.
A California manufacturer provided permission, or sources of permission, by
chapter and page of every illustration in their book, a listing consisting of five
pages of single-spaced typing.
A national organization granted permission to convert all the illustrations in
their book to slides.
NON-PRINT MATERIALS — AUDIO
DiKc > Cassette
A New York producer's vice-president would not grant permission. In response
to a later inquiry, the company's vice-president for copyright granted permission.
A California producer permitted six copies each of 10 recordings.
A New York producer would not grant permission for reasons of "deprivation
of royalty."
An Illinois producer allowed two copies only for independent study use.
A Colorado producer allowed one copy only, and that only to protect the origiiial.
Reel > Cassette
A New Y'^ork producer granted permission for a fir.st copy, and charged 40 per-
cent of the initial cost for each additional copy.
A Massachusetts producer of language tapes granted permission to convert an
entire course from reel to cassette.
286
Cassette > Cassette
A New York scieuce materials producer and a New York language materials
producer allowed the making of one copy to protect the master tape.
An Illinois producer refused permission to duplicate, but agreed to replace
damaged tapes for $1.00
A university's audiovisual production facility allowed one copy of each cas-
sette purchased.
NON-PKINT MATERIALS — VISUAL
Filmstrip > Slides
A New York producer granted permission to cut filmstrip and mount the
frames as slides, but would not grant permission to duplicate photographically.
A New York producer would not grant permission to duplicate, but offered to
produce slides from their filmstrips for $20 per set above the cost of the film-
strips.
A California producer replied that they could not grant permission because the
material (regretfully) was in the public domain.
A California college audiovisual production facility would not grant permission,
A Massachusetts producer granted permission to make two slides only from
each frame in a filmstrip.
Slides > Slides
Illinois, New York, New Jersey, and California producers would not grant
permission. One producer did offer to provide multiple copies of sets at reduced
cost.
A New York producer agreed to grant permission at 40 percent of the list price
of the sets.
NON-PRINT MATERIALS — PROGRAMS
Filmstrip /Record > Slide/Cassette
A New York producer replied, "Since it is not for commercial use, do what is
best for your purpose."
Slide/ Cassette "> Slide/ Cassette
A California producer said "yes," no conditions.
NON-PRINT MATERIALS — TELEVISION
CBS Affiliate Station
Program Director replied, "Go ahead (videotaping off-the-tube, prime-time)
since it is for one-time use and erase the tape after that use."
PBS Affiliate Station
Program Director replied, "Yes. We can't give you permission, but neither can
we deny you the right to do it (!) O.K., for one-time use."
In many cases, I have found that permission depends on the type of media
being converted. A New York producer, for example, would not allow the dupli-
cation of slides, but agreed to converting disc recordings and text to cassette
recordings. In other cases, permission would be granted if you were willing to
pay the price. In one case, the fee was equal to the cost of the material itself ; in
another, fees were set at $100 per tape, $100 per filmstrip, and $50 per booklet.
Sometimes, on the other hand, agreements seemed to be more reasonable, such as
granting permission to convert transparencies to slides and text to cassette for
an entire program, the only condition being that you adopt their text and cite
publication information in your reproduction.
It is not easy to draw simple conclusions from these many experiences. Every
situation has its unique set of circumstances, and constraints, and will differ as
the educational institutions and the commercial suppliers differ. Every transac-
tion must be worked out formallv and diplomatically. It often becomes the
responsibilitv of the instructional developer to assure that this is done. Faculty
who do not fully understand the complexities of the problem should be provided
with inservice programs or other means of becoming aware: the instructional
develoner will need all the sympathy he can £ret from his colleagues. Meantime,
more publishers and producers are mnking their media available in a variety
of formats. This fnct, and new copyright legislation, should result in a less
complicated and more sntisfying task for the instructional developer charged
with acquiring copyright clearances.
287
[Reprinted from Audiovisual Instruction, published by tbe Association for Educational
Communications and Technology, February 1975]
CoPYKiGHT Today
(Jerome K. Miller)
Authors have become increasingly concerned about the large-scale copying of
*:heir works, prompting them to place conspicuous copyright warnings in their
books. Author-illustrator Jan Adkins recently added the following warning to
one of his books :
We have gone to considerable diflBculty and expense to assemble a staff of
necromancers, sorcerers, shamans, conjurers, and lawyers to visit nettlesome
and mystifying discomforts on any ninny who endeavors to reproduce or trans-
mit this book in any form or by any means, electronic or mechanical, including
information storage and retrieval systems without permission from the pub-
lisher. Watch yourself !
Toolchcst. (Walker, 1973).
QUESTIONS AND ANSWERS
Question: Our school has some old sound filmstrips with the soundtrack on
phonograph records. We would like to copy the sound onto cassettes and destroy
the records. Is it necessary to seek permission from each producer to do this?
If so, how can we get permission from producers who have gone out of business?
Answer 1 : This situation frequently arises in discussions relative to copyright.
The fact that filmstrips are "old" does not mean that the copyrights on those old
filmstrips have expired. The present term of copyright is for an initial period
of 28 years, and if renewed in the 28th year, copyright can be extended for an
additional 28 years. The fact that a producer allows the filmstrips to go out of
print does not detract from the copyright protection afforded them. It must be
kept in mind that even if a producer allows materials to go out of print it does
not mean that the producer has no need for those materials. For instance, pic-
tures from an old filmstrip which are no longer being distributed might be
utilized in a revision of that work. It would be advisable to contact the pro-
ducer and seek permission to transfer the sound recordings from discs to tapes.
Of course, if the producer has gone out of business, such an attempt would be
quite difficult unless Ihe copyrights have been assigned to another organization.
Even then, that particular information might not be readily available. If an
honest attempt is made to contact the producer and nothing results from it,
it would seem as though the school has done all which could reasonably be
expected of it.
Ivan R. Bendeb,
Chairman, Copyright Committee.
Educational Media Producers Council.
Answer 2 : Many of the producers of sound filmstrips have been very coopera-
tive in permitting their customers to convert filmstrip soundtracks from phono-
graph records to cassettes. If the producer has an established policy on this
matter, his or her sales representative should be able to answer your question.
If there is any doubt about this matter, though, be sure to write for permission
before copying.
JKM.
Question: A few years ago the faculty of this vocational-technical school
developed an unusual course for our advanced students. We delayed introducing
it until we found a suitable textbook. Last winter a new text was published
which we considered appropriate to the course. We ordered 60 copies in March
for August delivery ; the publisher confirmed the order. Two weeks before school
started, the publisher advised that the text was out of stock and would be ready
in several months.
Since a textbook is essential for this course and no other was available, we
either had to drop the course after 55 students had enrolled, or reproduce the
book in the school print shop. We chose to honor our commitment to our students.
We made offset plates from a sample copy of the book and several teachers
worked over the Labor Day weekend to print and bind 60 copies. They were sold
through the school bookstore for the cost of the materials.
288
When the publisher's representative learned of our action, he purchased a <?opy
of the book we printed and advised that we might be sued for copyright viola-
tion. We aren't sure where we stand in relation to the law, but we feel morally
justified in our action. Please comment on this case.
Answer 1 : Because of potential litigation in this matter, the only conclusive
decision would have to be a legal decision. However, using the doctrine of "fair
use" as a guide, an informal opinion would be that an illegal act has taken
place for these reasons: 1) The publisher's (proprietor's) permission was not
obtained in advance. 2) Multiple copies were made. 3) The concept of "amount
and substantiality" was clearly violated in that the entire work was reproduced.
4) The sales market for the work was somewhat affected.
Eugene H. White,
Director of Audio-Visual Services,
Los Angeles City Schools.
Answer 2 : The action taken by this school was clearly in violation of copy-
right law, both existing and proposed. While the concern over the late delivery
of the textbooks was undex-standable, there was another approach that might
have satisfied both the need for the materials and the observance of the law.
A phone call to the publisher, giving an explanation of the circumstances, would
probably have resulted in permission to duplicate either the first few chapters
or the entire work for a moderate fee. Publishers generally are anxious to rectify
any inconvenience caused by late deliveries or out-of-stock orders. The problem
is that no one thinks to ask tbem. The paper shortage, energy crisis, and slow
delivery schedules will probably cause more problems of this type in the months
to come. It would be well for educators to remember that there is an alternative
to unauthorized duplication — ask for permission.
Susan Engelhart,
Staff Director, Copyright and International Trade,
Association of American Publishers, Inc.
QUESTIONS NEEDED
The editor needs additional questions to be answered in this column. The
identity of individuals submitting questions will be held in the strictest con-
fidence. Please send all correspondence to Jerome K. Miller, Chairman, AECT
Copyright Committee, 1025 Adams Circle, Apt, 2B, Boulder, Colorado 80303
TESTIMONY OF HOWARD B. HITCHENS, EXECUTIVE DIRECTOR,
ASSOCIATION FOR EDUCATIONAL COMMUNICATIONS AND
TECHNOLOGY
Mr. Kitchens. Thank you for the opportunity, Mr. Chairman.
I represent a relatively small organization but, we think, a key one
in our concern with the copyright law that is under consideration. We
are about 8,000 strong, and we are technologists, if you will. We are
people who are concerned at all levels of education with the intro-
duction of technology into the educational and instructional process.
We regard technology, however, as something more than a collection
of educational machines and materials. We believe it represents a
systematic approach to practical problems that emphasize the appli-
cation of relevant research in order to seek problem solutions.
The professional in our field can be foimd in the elementary and
secondary schools, in the colleges and universities, in training insti-
tutions of all kinds. He is a guy who is perhaps developing instruc-
tional materials for accomplishing specific educational objectives for
use by teachers in classroom settings or other settings. He may be
producing instructional programs over, you might call it, a mass com-
munications medium : Television production, this type of thing. He
may be found assisting teachers in selecting materials to meet objec-
289
tives or evaluating materials or even identifying the long-range ob-
jectives, tliemselves.
Our people are quite concerned with two points in the copyright
legislation. First, we have been dealing a great deal with the issue
of fair use and how we can take the needs of both the producer of
instructional materials and the consumer or user of instructional
materials into account.
"We feel that we find ourselves in the role of copyright experts quite
frequently, in the institutional setting, because we are either a cus-
todian of, or have responsibilities for, the logistical management of
instructional materials.
We think that the teachers and media professionals and the librar-
ians create markets for an author's work and give them visibility.
Also, in this day of individualized instruction, the so-called open
classroom, ungraded schools, and student self-evaluation, the success-
ful educator has to have available a wide range of learning resources
in order to be effective.
Therefore, we haA'e adopted a position on what can be considered
a relatively small point, which we think serves both groups, the pro-
ducers and the users. That, in regard to section 107, is that we are
concerned with spontaneity. We feel that the preAdous House and
Senate reports which identified spontaneity as an important deter-
minant as to whether or not a use is fair is unfortunate. We feel that
the classroom teachers do not — we know they do not — always act
individually or at their own volition. We are in an age of specializa-
tion now in education and in instruction management just as we are
in other segments of our society. Frequently, a media professional
is called upon to assist in that decisionmaking process. A teacher does
not make the decision alone. A media professional is not classified as
a classroom teacher, and sometimes is classified as an administrator.
We feel this should not prevent him from playing his role in the
effective management of instruction. We are not suggesting a different
fair use to be extended to media professionals; we are suggesting that
they be allowed at least as much freedom as the teachers and other
edur'ational professionals.
We are currently working with other interested groups on this
problem and will be happy to try to come up with some language to
substitute for that which is currently in the legislation.
The other issue I would like to address is the general question of
how we resolve tlie argument between producers and consumers.
We have spent many hours working witli producers in an attempt
to work out guidelines that would assist educators in holding up the
current copyright law and looking at the laws that are pending. We
have come to the conclusion tliat the best means to solve the problem
is developing voluntary licensing agreements between educators and
producers. Such agreements would allow a predetermined amount of
copying, a kind of copying, or maybe unlimited copying, either for
no charge or a predetermined fee. Such an agreement would set the
bounds of fair use in advance and would also allow educators to take
advantage of the so-called teachable moment.
We are not asking you to establish in legislation a licensing agree-
ment. We think that should be voluntary. We are asking for your
290
support and encouragement to both sides to sit down and develop
licensing agreements.
The remainder of my testimony is submitted, of course, for the
record. I hope it would be entered into the record, Mr. Chairman.
Mr. Steinbach. Mr. Chairman, I next would like to introduce our
final witness, Eobert F. Hogan, executive secretary of the National
Council of Teachers of English.
[The prepared statement of JVIr. Hogan follows :]
Statement of Robert F. Hogan, Executive Seceetary, National Council
OF Teachers of English
Mr. Chairman and members of the subcommittee: I am Robert F. Hogan,
Executive Secretary of the National Council of Teachers of English. The National
Council is the world's largest independent organization for teachers of one sub-
ject. Its 115 thousand individual, associate, and institutional members and sub-
scribers are drawn from all levels of education, elementary through graduate
school. For them, I express our appreciation for this opportunity to submit
written and oral testimony to the subcommittee.
Although a substantial majority of this membership consists of classroom
teachers, it also includes authors, editors, and publishers. The Council itself is a
publisher of seven periodicals and about fifteen books and monographs each year,
all protected by copyright. I stress those two facts, on the chance that someone
might construe the remarks that follow as threatening to the interests of authors,
publishers, and others who have a genuine stake in reasonable protection through
copyright. The Council sliares that stake.
What chiefly concerns us is, while ensuring the maintenance of reasonable
copyright protection, to recognize fully the needs of more than a million ele-
mentary classroom teachers who spend up to half their teaching time and effort
on language arts and reading, 175 thousand secondary school teachers of English,
and, most of all, the 60 million children they teach.
I must confess that I prepared these remarks with a sense of deja vu. I've
been here before ; we've all been here before — teachers, publishers, authors, legis-
lators, and legal coimsels for all four groups. We have been locked into this con-
frontation for nearly as long as the United States was involved in Indochina. I
can't be alone in thinking it's time we brought it to conclusion and in hoping
we can.
But deja vu isn't quite an appropriate phrase. It captures the feeling but fails
to describe the situation. It seems as though we've been here before, but wliere
we are now is not, on close inspection, where we were in 1963, when the Ad Hoe
Committee first gathered its strength.
Tlie feeling of deja vu began with the first three paragraphs — lifted from my
statement in 1973 before the Subcommittee on Patents, Trademarks, and Copy-
rights of the Senate Judiciary Committee. There was no need to alter them.
Nothing substantive had changed. Their substance is not greatly different from
introductory statements by NCTE representatives at hearings of the Subcom-
mittee of the House Committee on the Judiciary at hearings in late spring and
summer, 1965.
Nevertheless, since 1965 we've gained ground and we've lost ground. Among
the gains I would count the reduction in minimal statutory damages for an
innocent infringement ; and the impulse in the proposed statute, as well as in
the accompanying report, to clarify the meaning of "fair use." The 1965 House
Bill was tlie first effort to provide legislative sanction to that judicial principle,
but it was in such skeletal oiiMine as to scare anyone who trembles before
skeletons : "Notwithstanding the provisions of section 106, the fair use of a copy-
righted work is not an infringement of copyright" is the entire bone structure
of that skeleton. I'm aware of how much the writers of that House Bill felt
they were doing ; Init how little they actually did is revealed in their summar.v
statement of "Highlights of the 1965 Bill for General Revision of the U.S. Copy-
right Law." Of fair use they say, "The bill would add a provision to the statute
specifically recognizing the doctrine of fair use, but without any attempt to
indicate the application or define the scope of the doctrine."
Granting the landmark nature of this step, I still had the feeling of the World
War II Navy enlisted men v\'ho heard this announcement : "There will be liberty
291
for the liberty sections, but no liberty boat." To paraphrase for those who may
have missed the "enlisted" experience of World War II, "those who are entitled
to, may go ashore on liberty ; but there is no way to get there." The present bill
goes considerably farther :
§ 107. Limitations on exclusive rights : Fair use
Notwithstanding the provisions of section 106, the fair use of a copyrighted
work, including such use by reproduction in copies or phonorecords or by
any other means specified by that section, for purposes such as criticism,
comment, news reporting, teaching, scholarship, or research, is not an in-
fringement of copyright. In determining whether the use made of a work
in any particular case is a fair use the factoi-s to be considered shall include :
( 1 ) The purpose and character of the use ;
(2) The nature of the copyrighted work ;
(3) The amount and substantiality of the portion used in relation to the
copyrighted work as a whole ; and
(4) The effect of the use upon the potential market for or value of the
copyrighted work.
But while we were gaining ground in the statute, we were losing ground in the
accompanying report. During the 1965 hearings, among those who testified on
behalf of authors and publishers were two witnesses who presented interlocking
testimony : John Hersey, on behalf of the Authors League of America, and Dan
Lacy, managing director of the American Book Publishers Council.
Mr. Hersey referred to a hypothetical teacher in a small town in "Montana
or Maine or Georgia" who wanted to share with her students Robert Frost's
"Stopping By Woods on a Snowy Evening." Since copies were not otherwise
available, she made a set for her class. Mr. Hersey went on to say that this was
nothing new and that he saw nothing wrong with it. He added, "If there is a
suit in the future, I can also assert to you that it will not be because of violation
of what we would consider to be fair use, but only because of some abuse."
Obviously, Mr. Hersey thought the actions of that teacher were not an abuse.
Later, Mr. Lacy stated,
"In the whole history of copyright law, in all the undoubtedly hundreds of
millions of uses of copyrighted material by hundreds of thousands of teachers
over many decades, I think it is true, and this is based on rather careful study,
that no teacher has ever been sued by a publisher for copyright infringement.
'Fair use' covers an enormous area. Beyond fair use, there has existed a broad
margin of safety in which the common good sense of publishers and good faith
and good will of teachers have prevented copyright from being any limiting or
oppressive factor.
"Teachers would continue under the new law to enjoy all the freedom under
the old and have that freedom buttressed and reinforced by the specific au-
thorization by statute of the doctrine of 'fair use' * * *. The present doctrine
of fair use is, let the Montana school teacher go unimpeded without opening the
door to the major abuse."
Mr. Lacy's concern was that to include in the legislation anything more would
either restrict some teachers from making legitimate uses of materials or open
the doors for others to make illegitimate uses. However, in the House report to
accompany H.R. 4347 under the discussion of "Multiple copies of excerpts" the
following statement appears :
"In general, and assuming the other necessary factors are present, the com-
mittee agrees that the copying for classroom purposes of extracts or portions,
which are not self-contained and which are relatively 'not substantial in length'
when compared to the larger, self-contained work from which they are taken,
should be considered fair use. Depending on the circumstances, the same may
also be true of very short self-contained works such as a four-line poem, a map
in a newspaper. * * *"
This statement seems to be much more restrictive than the spirit of the
remarks by Mr. Hersey and Mr. Lacy. I refer specifically to the word very and
the phrase four-line. Even the example that Mr. Hersey offered and that Mr,
Lacy picked up, Frost's poem, contained sixteen lines.
NCTB strongly urges that the following wording be substituted :
"Depending on the circumstances and in order to protect spontaneous, creative
teaching, the same would also be true for temporary use of short self-contained
works such as poems, maps in a newspaper, vocabulary builders from a monthly
magazine, essays, and short stories. This should not be constnied as permitting
292
a teacher to make multiple copies of the same work on a repetitive basis or for
continued use."
Please understand that this is not a request for an unlimited hunting license
for English teachers. Nor is it to say that everything every teacher has done till
now with copyrighted materials would be adjudged fair use if it came to trial.
We know there have been abuses and have listed examples in previous testimony.
If, for example, a school or an entire school system were to manufacture collec-
tions of poetry for repeated use without securing permission and paying fees,
I would deemthat not fair and therefore illegal. Similarly, if schools duplicate
consumable materials specifically intended for classroom use and protected by
copyright (e.g., answer sheets for published tests or workbook drills), I would
deem that not fair and therefore illegal. If either such practice came to suit, and
if I were asked to testify because of my position in NCTE and the expertise
some might attribute to it, my testimony would be on behalf of the copyright
holder.
What we do seek and need is a clearer statement, either in the statute or
in the accompanying report, reassuring us that in a spontaneous teaching situa-
tion, we may make for one-time use by our students in our classrooms, multiple
copies of self-contained short works of literature.
In the absence of that assurance, we must either be less creative than we'd
like to be or depend on the "good will, good sense, and good faith" that Mr. Lacy
referred to and on the fact that no copyright holder has sued a teacher, so far.
However, in 1961 the standard copyright notice for one major publisher was,
"All rights reserved— no part of this book, may be reproduced in any form
witliout permission in writing from the publisher, except by a reviewer who
wishes to quote brief passages in connection with a review written for inclusion
in magazine or newspaper." In 1975 the notice for the same publisher reads,
"All rights reserved. No part of this book may be reproduced or transmitted in
any form by any means, electronic or mechanical, including photocopying, record-
ing, or any information storage and retrieval system, without permission in
writing from the Publisher."
Apart from pointing out a much harder line on the part of at least this pub-
lisher, I am compelled to ask what has happened to even the narrowest con-
struction of fair use? Beyond that, what happened to "good will, good sense,
and good faith"?
I don't mean here to take unfair advantage of Mr. Hersey or Mr. Lacy. I
don't know of any writers or publishers I respect more. I think my references to
their statements are accurate and fair to the contexts which suri-ound them.
But as all those parties with a stake in a new copyright law have expanded
in number and grouped and regrouped, as lines of special interest have been
drawn and redrawn, English teachers and, even more, their students, have lo.st —
particularly if they're restricted to one-time copying of four-line poems, which
is to say one line less than a single limerick, ten lines less than one sonnet.
The ironic thing in all this is that ten years of argument over the content and
substance of a new copyright law may have moved us no closer to a satisfying
law, but may also have made adversaries of three interdependent groups :
teachers of language and literature, those who use language best, and those who
publish the users of language for the teachers. Despite soothing reassurances
that we are all still friends, English teachers cannot escape observing the erosion
of relationships, the erosion of the earlier concepts of "good will, good sense, and
good faith." AVe seek assurance in the statute or in the accompanying report that
the best and most imaginative among us are not outlaws or bootleggers.
TESTIMONY OF ROBERT F. HOGAN, EXECUTIVE SECRETARY,
NATIONAL COUNCIL OF TEACHERS OF ENGLISH
Mr. HoGAN. Mr. Chairman, members of the subcommittee, my name
is Robert F, Ho^an, executive secretary of tlie National Council of
Teachers of English. There is an ironic justice in that, because in my
written testimony on page 3, it is that the egregious typographical
error occurs. I would be grateful if you would compensate for my fail-
ure and make substantially read substantiality; that is what I meant.
The focus of my attention is fair use, this moniing. We are, of course,
293
interested in the entire statute and are pleased to have a seat on the
ad hoc committee. We think, as classroom teachers of English, we have
a particular stake in fair use.
And in my Avritten remarks, I note an erosion of where we were 10
3'ears ago, from both Mr. Hersey, on behalf of the Authors League, and
Mr. Lacy, on behalf of the American Book Publishers Council—they
told us we could do what we were doing all the time ; it was all right.
They used the example of a teacher who wanted to make a copy of
Frost's Stopping By Woods on a Snowy Evening.
Mr. Kastexmeier. I regret very much doing so; I am going to ask
you to withhold making the balance of your statement. We do have a
vote on at this very moment.
Accordingly, the subcommittee will recess for a period of about 10
to 15 minutes, at which time we will return to Mr. Hogan's statement,
and then be able to have a colloquy with the rest of the witnesses. We
will recess until approximately 10 minutes to 11.
[A brief recess is taken.]
Mr. Kastenmeier. The commmittee will come to order.
When we recessed we were about to hear Mr. Robert F. Hogan, exec-
utive secretary, National Council of Teachers of English.
Mr. Hogan, have you had an opportunity to reconsider your state-
ment ?
Mr. Hogan. Perhaps to shorten it. The nub of it I think is on page
5, and I am citing there the wording from the 1966 House report. The
concluding sentence at the top — depending on the circumstances, the
same may also be true of very short self-contained works, such
as a four line poem, et cetera. It is the term very short, and the illustra-
tion of four lines that troubled me — one line less than a limerick ; 10
lines less than a sonnet. The word "may" is interesting, too. As far as I
know, based upon Mr. Lacy's testimony, no teacher has ever been tried
under fair use. What it means I do not know.
We offered to substitute something like the longer paragraph, about
a third of the way down the page.
If I could depart from these remarks entirely. I think through an
anecdote I probably could tell you more than the prepared remarks
tell you — I recall a meeting when we were going to Athens, Ga.
8 years ago. A friend of mine and a stranger got into a cab together,
and driving into town, after introductions all around, "What do j'ou do
and where do you do it," there was a lull in the conversation. I said to
the cab driver, "Tell me about the liquor laws in Athens." He said,
"This is a dry county. You cannot get a drink any place." Tlien the
stranger got out of the car. Then he said, "Of course, there are beer
and wine places around. They are hard to find, but you can get to
them." The second person got out and I was left alone in the cab. As we
were pulling up to my motel, he said, "Of course there are bootleggers
around here to." I said, "Really?" He said, "Yes." I said, "Who would
know where they are." He said, "Any of the bellhops in the hotel would
know." As we came to a full stop, he said, "or a cab driver would
know."
It seems to me it was remarkable, the balance of forces in Athens,
Ga.; the fundamentalists wanted a dry county, and they had one.
The libertarians wanted a drink, and they could get one. Nobody both-
ered the bootleggers.
294
I guess what I would like under statutory protection is more pro-
tection and higher status than the bootlegger in Athens, Ga. And
it ought to be statutory protection.
I dislike disagreeing with the previous speaker. I do not have a great
deal of faith in voluntary agreements. What we would like is protec-
tion under the law.
Thank you.
Mr. Steinbach. We would be happy to entertain any questions that
you might have.
Mr. Kastenmeier. In connection with the remarks just made by Mr.
Hogan, I think as we had tried to do years ago, we should, whatever
we finally want the law to state, the statutory language should presume
enforcement, and resort to what is offered therein. We should not
write a law which it is anticipated will not be enforced, and which part
of the defense for it is that there will be forebearance on the part of
those entitled to the i-ights under the law.
Rather, we should presume that the law, to the extent that it con-
tains rights and rights of enforcement will be so enforced.
I have just a few questions, then I will yield to my colleagues.
My first question is addressed to Mr. Raskind. I appreciate why you
oppose the law, at least the bill as it is proposed in your statement.
In terms of your understanding of what the present law is, case law
or present statute, do you find that it is acceptable to the educational
user of copyrighted material, granted the many parts of the law in
terms of its effect has not been obviously codified or made clear through
case law ? As you presently understand it, is it acceptable prior to con-
sidertion of this bill ?
Mr. Raskind. Mr. Chairman, my answer to that would be as follows.
My understanding does not comport with much of the understanding
of peo])le in this room. That is the difficulty. So what I would say,
the WiUiams <& Wilkms- opinion as affirmed Ijy an equally divided Su-
preme Court is a starting point. It is the recognition that fair use ex-
ists in this context. That should be the base line.
We ought to have a statute that would take away the pressure of this
varying understanding among the various people in this room. So I,
as a teacher, if something comes up in the classroom discussion, I might
find that day or the next day that there is an article in a contemporary
news magazine, as a colleague of mine did a month ago — he asked me,
and I said to try to get permission from them. They wrote back and
said $150. He was going to use it a month away, and it ended up he did
not use it. The upshot of that is the educational classroom hour then
was deprived of that material.
The publisher got zero revenue. If the classroom use had been per-
mitted, the students would have gotten a photocopy showing that jour-
nal. They would then have known that the journal contains that mate-
rial. For students, when they are students of law, materials are expen-
sive. They would not be able to subscribe to a $200 or a $300 a year serv-
ice. They do not need it.
We ask for a statutory definition of fair use that permits what ex-
ists. It is recognized — WiUiams (& Wilkins — in 1909 it was recognized
that scholars could sit in a library doing research and hand-copy,
without violating the statute, could hand-copy an article.
295
All we ask is that contemporary technology permit the same thing.
Mr. RosENFiELD. May I address myself to that ?
Mr. Kastenmeier. Indeed. To restate the question, it is to say to
the extent that the present law is discernible, do you think it is a fair
balancing of interest — the interest you represent, or the interest of
proprietors ?
j\Ir. RosENFiELD. I would say "No" to both your original phrasing,
and to your subsequent phrasing. It is not at all a fair balance.
Let me take the second first.
It is not a fair balance because our main point is that there is a basic
difference between commercial and noncommercial, or nonprofit uses.
Fair use has been developed 98 percent in the context of commercial
uses — a perfectly wise and sound rule. By being put into the context of
commercial rivalries and competition, the character of the nonprofit,
educational, and library use is perverted.
To your first question. Think — here, in Mr. Freitag, you have a head
of a department of a small high school. He is a sophisticated person. He
has people on his staff who are less sophisticated. Williams & Wil-
kins represents the judgment of 14 judges, if you include the trial
judge as one of them. They split exactly down the middle, seven to
seven. If they could not make up their minds as to what fair use is,
how can you get his teacher or for that matter the law school teacher
to be able to make a judgment.
What we are saying, Mr. Chairman, is that your last report and the
Senate conunittee report both say that there is no intention to change
fair use. We do not know what it is, and nobody knows what it is. You
get 5 lawyers in a room on fair use, and you have 15 answers.
We are saying that that does not make sense for a teacher.
Mr. Kastenmeier. Both you and Mr. Raskind are calling for an ex-
plicit statutory definition of fair use, which will meet your needs.
Mr. RosENFiELD.Yes, whether it is in terms of a limited educational
exemption or some other form the committee can devise that is su-
perior. The answer is "Yes."
]Mr. Kastenmeier. Yes ?
]SIr. Raskind. If I may, the statutory definition, as in the present
bills, section 107, should not be undercut, as it is, in my opinion, by
section 108(g) (1) and (2), and by some of the damage provisions.
We would urge that as well.
Mr. Kastenmeier. I understand.
My second question is directed, I think, to Mr. Freitag. That is, you
raise the question in the context of the present law, requiring reasser-
tion of the right at the end of 28 years.
I would want you — my question is, why do you feel that that is use-
ful to you ? Are you making the point that there is an interest that edu-
cators have in finding material or having access to it in the public
domain ?
Mr. Freitag. The original constitutional purpose was to get the ma-
terial into the public domain. Anything that would serve to prohibit
that, to further prolong the availability of material, it seems to us,
does not advantage the public domain in any way.
If I may allow an extremely personal point of view, I would like to
see 28 years reduced. I had some students that made their livelihood
by designing covers for books, things of that nature, magazines and so
296
on. Their protection under law is far less than copvrio-ht provision at
the present time. It seems to me their liAelihood is very closely de-
pendent upon their ability to develop their creativity and sell it. Their
protection is far less. There is great inequity along the line as far as
those kinds of protections — patent law, for one.
Our feeling that with the 28-year renewal, it has permitted 85 per-
cent of the material to go into the public domain after the first 28 years.
We would surely hold the line there.
Mr. Kj^stenmeier. The purpose of the question is to determine
whether there really is an interest in obtaining material — utility, a pul)-
lic interest in obtaining material earlier than the expiration of the life
plus 50 or 75 years proposed in this bill. Whether there is a distinction
between types of material, that which is valuable and for whicli a
greater term or renewal term ought to be sought, and that which is not
available to the original publisher, producer, creator, that also lapses
into the public domain at an earlier time.
Mr. Freitag. The 28 plus 28 is very cut and clean. The life of the au-
thor plus 50 is ver}' difficult. It is hard to see how one could determine
that the copyright gTiarantee has expired.
]Mr. Ivastenmeier. Thank you.
The gentleman from Illinois, Mr. Railsback.
Mr. Railsback. Thank you, Mr. Chairman.
I would like to address this question reall}- to all of you or to any one
of you.
Is the thrust of your remarks directed against the payments or j^our
inability to get access to material ? Which is more important ? Do j^ou
object to making any payments, or unreasonable payments, or is it the
difficulty in getting access?
]Mr. Raskind. I would say, Mr. Railsback, our position is, in prin-
ciple, there is an area of usage where payments do not begin, and that
has been recognized at the outset, for the scholar to hand-copy a work.
Our second point is, we cannot do, as teachers and researchers, what
we must do if we are always under the threat or clout or have to bear
the full burden of being the party defendant in an infringement ac-
tion. We need availability with some clarity under the statute.
Mr. Railsback. You would, I take it. diilerentiate between a non-
commercial extensive reproduction and the making of a single cop}'.
In other words, you made a distinction between noncommercial and
commercial. But I take it that you would not carry that to a point
where you would have extensive, multiple noncommercial reproduc-
tions. Or would you ?
IMr. RosENFiELD. Mr. Railsback, the answer is fundamentally that
you are correct as to our understanding, but let me back up immediately
to the term "extensive.'' We do not, for example, think — in answer to
INIr. Pattison's question to the Department of Justice — that we ought to
have 1,000 copies. The Department of Justice went further than we.
We do think if jNIr. Freitag or Mr. Hogan or Mr. Raskind have a class
of 30, 40, 60, or 100, the class ought to have the copies — thus, it is a
limited copying.
]Mr. Railsback. Would you feel the same way if copies were to be
available at a reasonable amount and easily accessible ?
Mr. RosENFiELD. No ; because then you would be destrojang fair use
altogether. The thrust of your remark, if you would permit me to put
297
it this way goes to whether there is to be fair use at all, or whether you
are to have a pa3'ment system which overrides everything and forl)ids
any fair use. Our answer to that question is that to the extent that fair
use or a limited educational exemption applies, there should be no pay-
ment. Beyond that, payment.
In other words, we do not belicA^e, in ]Mr. Pattison's case, that Ave
ought to have the right to make 1,000 copies, just for the purpose of
copying, per se.
Mr. Railsback. Especially if copies are available from the owner at
a reasonable figure.
Mr. IlosExriELD. Again, we are talking copies of what
Mr. Railsback. We are talking about educational materials.
jNIr. RosENFiELD. Let me be specific in the context.
Suppose the teacher reads something the night before class or 2 days
before class. Getting copies is sometimes a 6-month job, assuming that
you can get them, and rarely less than a month or two. By then the
teachable moment would have disappeared. So there is no point in
bringing it up.
Mr. Railsbace. You are directing your remarks, now, to accessibility.
Mr. RosENFiELD. Accessibility in some respects without cost ; in some
respects beyond fair use or the limited educational exemption with
cost. Accessibility is our principal objective.
Mr. Railsback. Mr. Freitag, you objected, I think, to section (2),
which might have been subsection ( 1 ) .
How would you separate a community storefront reception, or a re-
ception at a dormitory from general public viewing ?
Mr. Freitag. INIaybe I can do it by alluding to something that is more
real in my immediate situation, although I would be glad to get spe-
cific in your question-
We have a language lab in our school. Some years ago, when lan-
guage labs became popular, they involved a $60,000 outlaj^ conduits
underneath the floor, air-conditioning, and so on. Everything was very
space-age. The headsets and tapes and all that sort of thing. We never
bought into that in my district. We were far too pragmatic to be
charmed by all that mechanism. What we bought was a wireless sys-
tem. The sender goes out from a simple tape recorder or anything ; the
kid has a headset, wireless receiver on top. We are in business in a very
few seconds. It is a small item. We use it 5 or 6 minutes, then you are
done ; put it aside.
We have now abandoned that to go to cassettes for several reasons.
No. 1, we are a school of 2,800. Of those 2,800 totally elective programs,
some 1,400 are taking French, German, and Spanish. We are now going
to cassette usage in our library. We have what we call self-instruction
rooms. The students sit down with a cassette, plug in the machine, lis-
ten to wliatever they need, and go. Very few students can get to that
library because of time constraints — all their sports involvements,
things like that.
We dealt with a publisher in New York to get permission to copy
the teacher tapes onto cassettes and use a rapid cassette duplicator.
Students bring in their blanks, pop it on that machine, and in 1^2
minutes they have an hour's worth of taped material which is coordi-
nated to the text. They take it home and there use their machine.
57-786 — 76— pt. 1 20
298
Mr. Eailsback. You are not suggesting that we expand to really ac-
complish your purpose by also permitting general public viewing ?
Mr. Freitag. The thrust is to be able to allow the educational ma-
terial to be where the student is. I frankly do not care if my students
listen to tapes while they are washing dishes for mom at night.
INIr. Eailsback. Do you all feel the same way ?
Mr. Freitag. There is another part to your question. I would like to
get at the paying part. Again, allow a personal example that is more
close to me.
In Pennsylvania we have an act, 372, that says any field trips con-
ducted by the public schools, the parochial schools in our district must
be offered the same opportunity to participate in the field trip — not at
the same time, necessarily, but an equal opportunity.
I do not wish to argue the merits, intent, or anything else. I just
want to mention the effect. The effect is that we have eliminated field
trips because of the cost factor being accordionlike in nature. There is
no way to budget it. The budget is really the issue. Everything else I
think is begging the question — in an age when we are saying we have
to take the child out of the classroom, take him to the resources in the
communitv that are immediately at hand, because if budgetary con-
siderations are being expanded in a way that has been difficult to deal
with, we have nothing. It could very well happen that the budget,
which is one pie, would have to be sliced that many more ways. The
result would be nothing. We would be back to the old Latin classroom
where we have the book memorized, those couple of paragraphs, where
the teacher would be frustrated in his attempt to bring in things that
really turn on students.
Mr. Eailsback. Professor Easkind, may I ask you to elaborate a
little on your objection to section 108 (g) .
Mr. Easkind. Congressman Eailsback, I would call your attention to
page 4 of my statement, and our objections are with regard to (g) (1)
of section 108— appears the phrase concerted reproduction; in (g) (2)
there is systematic reproduction. As the Senate report recognized, our
position is that the legislative history can give a precise definition to
that. So we urge that the difficult rule of thrusting upon the courts a
serious interpretive problem that would endlessly engage the usage that
it not be enacted.
Mr. Eailsback. Thank you.
That is all I have, Mr. Chairman.
Mr. Kastenmeier. Mr. Danielson.
Mr. Danielson. Mr. Steinbach, in your brief opening presentation,
you included language to the effect, whether you read it or not, at the
top of the second paragraph — although this is the fundamental ad hoc
position, the interest of each constituent group varies.
I would like to ask you this. Are there any fundamental differences,
any fundamental conflicts of interest that have not been resolved be-
tween your constituent groups. I realize there are some.
One of you like one aspect a little bit, and then the others. Is there
any language you agreed on which would be acceptable to your entire
group ?
Mr. Steinbach. I would like our counsel to respond to that.
Mr. EosENFiELD. There are eight fundamental ad hoc positions.
Eight positions have been articulated by the group as a whole.
299
Mr. DanielsojS'. The group as joint.
Mr. RosENFiELD. Joiiit, with some groups being less tied to any one
than others. Perhaps it would be helpful to you and the committee
very quickly to state those eight positions.
First : The limited educational exemption which has been discussed
as an expansion of the not-for-profit.
Second : The clarification of fair use, as has been discussed.
Third : The opposition to life plus 50.
Fourth : The waiver of statutory damages for innocent infringers.
Fifth : The library photocopying situation, which was discussed yes-
terday and to wliich Mr. Eailsback just referred, the opposition to
108(g).
Sixth : As Mr. Steinbach indicated earlier, that instructional televi-
sion, not public broadcasting but instructional television, was to be
treated as school activity.
Seventh : The opposition to a clearinghouse.
Eighth : That input into a computer not be infringement for the peri-
od of the study by the National Commission on Teclmological Uses,
which this committee approved last time, but that output be paid for
under the normal rules of the law.
Mr. Danielson. On those eight positions, all of your components of
your ad hoc group are in accord. Is that correct ?
]Mr. RosENFiELD. No. This is — a majority are in accord on that.
Mr. Danielson. I am asking this for a very specific reason. We are
only in our fourth day of hearings. It is apparent that it is never going
to be possible to bring all the different interests under consensus in a
copyright bill, let alone under sections 107 and 108.
If your group working together with eight components is unable
to come to agreement on your own, little, narrow interests of 107 and
108, why obviously we are going to have to render a Solomon's judg-
ment pretty soon and jut cut it down the middle.
Mr. RosENFiELD. Mr. Danielson, on 107 and 108, there is complete
agreement.
Mr. Danielson. On these eight points, even your little group here,
which is of common interest, could not seem to get together.
Mr. RosENFiELD. I do not think that is so. I think some of the groups
would give different priorities to different things. For example, there
are some in our group who are not especially interested in one or
another.
Mr. Danielson. I do not care about enthusiasm. I am wondering
about fundamental differences.
Mr. RosENFiELD. Fundamentally there is agreement within the
group.
Mr. Danielson. Thank you.
The type of materials that you gentlemen have referred to, as I
understand it, includes technical journals, but it also includes current
periodicals, news magazines, literature, almost anything that comes
under the heading of a copyright — any copyrightable material.
Am I right in that ?
Mr. Raskind. That is correct.
Mr. Danielson. You are concerned about items in which the incen-
tive is the writing of the material and the sale of copies by the author
as a profitmaking operation as well as those journals which apparently
300
are fundamentall}^ interested in disseminating technical knowledge,
the technical journals. You are interested in all of these fields.
What is limited about the limited educational use to which you
referred?
Mr. EosEXFiELD. Mr. Chairman
Mr. Danielsox. Where does the limit come in ?
Mr. RosENFiELD. First of all, if you would be kind enough to look at
the document
Mr. Danielsox. I will look at it.
Mr. Rosexfielu. First of all, we are not asking for the right to pub-
lish w^hole copies of everything that is available in copyright. For
example, we are not asking for the right to produce things which are
destroyed in the use — as w^itness, workbook exercises, standardized
tests.
Mr. Danielsox. Consumables.
Mr. RosEXFiELD. That is right.
Second, we are not asking, and vigorously oppose, the right of any
school or library or anybody else to copy for the purpose of compiling
a new book. In other words, Ave do not want our people to go in compe-
tition by publishing a new book.
Mr. Danielsox. On a duplicate of an old one.
Mr. RosEXFiELi). Excex^t for a given use, no other use, and certainly
not for sale.
Third, we are asking only for brief excerpts. We are not asking
for the entire work. We are not asking, for examj^le, for the right to
copy "Gone With the Wind."
Mr. Daxielsox. Except there are exceptions that have been stated
here today, such as a map, I believe.
Mr. Rosexfield. A short work.
In other words, w^hat we are saying is a short, self-contained work.
Mr. Raskixd. In the context, if I may, Mr. Danielson, draw your
attention respectfully to page 6 of my statement, sex^ond paragraph —
we do not seek the right to engage in multiple copying out of the
context of research and teaching; that is the protection.
Mr. Rosexfield. All for noncommercial use, for scholarship and
teaching use.
Mr. Daxielsox. To keej) it in the field of education and research ?
Mr. Rosexfield. Precisely. That brings me back to Mr. Railsback's
comment. We are not asking to make available things for the public as
a whole. This is within the limited context of the teaching or research.
Mr. Daxielsox. Thank you very much. Yes, sir?
]\Ir. Wigrex. May I say for the record, I think one of the ways we
may distingaiish the two, in answer to both of your questions : If we
use the word systematic instructional activities, just as we have done
in the case of instructional television. W^e arc not asking for the world,
we are asking for materials in the context of systematic use for instruc-
tional activities.
Mr. Daxielsox. I yield back the balance of my time.
Mr. Kastex'^meier. The gentleman from California, Mr. Wiggins.
Mr. WiGGixs. Thank you, Mr. Chairman. At the outset, I want to
apologize to our distinguished witnesses concerning my own lack of
knowledge with regard to this complicated field. At best, I am getting
301
my feet wet. If I ask questions which are overly simplistic, please bear
with me.
I am still grappling with the concept of fair use. I think I can
o\'ercome that, and for purposes of my question, I assume that there is
room in the law for some fair use of a copyrighted work. Now, I am be-
yond that, to the point of people in your business, educators or non-
profit institutions; and I understood that there is no difference in
ti'eatment between materials which are prepared essentially for your
market. It is one thing to make a casual copy of a copyrighted work
which is intended for general commercial distribution. I would regard
that on a casual, one-time basis for instructional purposes to be fair. It
is another matter to reproduce material wdiich is copyrighted, and
which was intended to be used and sold to nonprofit institutions for
educational jDurposes. Is there any substance for that differentiation ?
Mr. Raskind. The paradox is the kind of people that are the users.
If I am dealing with something in a course in Federal income taxation
that has a narrow issue of income distribution, there may be a page in
Samuelson's "Principles of Economics" that will illuminate that for
the student. The law student is not about to buy a $12 or $14 or $16
book for one or two pages. The choice is that this material almost ex-
clusively goes to consumers that are not potential subscribers or pur-
chasers. This is how we see it.
j\Ir. Wiggins. I understand the problem, although I would think
peiiiaps that is what libraries are for; so tliat a student would not have
to purchase a work if he wanted to refer to a citation.
Mr. Raskind. On occasion, if more than a page or a short excerpt
is used, I would ask tlie library to buy some copies and then put it on
reserve. That is a universal practice.
Mr. Wiggins. The draft language you have suggested, however,
really does not distinguish between the kind of material I am talking
al)out, that is instructional material. I am wondering about the wisdom
of proceeding with that kind of a different treatment.
Mr. Freitag. (Congressman, we have school subscriptions to Time
magazine at our high school that are ordered for the students in large
quantity for the social studies class. Let us say, at the point that Der
Spiegel rnagazine, which is its counterpart from Germany, and talks
about a kidnaping in Germany, that I want to compare with my Ger-
man 4 class the report, and the substance of the report, with that
whi^ch was reported in Time. The likelihood is, the span of time is 4
or 5 weeks before I could put those two items together, and we sub-
scribe to Der Spiegel from Germany. I have no access to those copies
that were distributed to the students, and I could not go on the
market to get that from the market stands. So T would take the article,
which is likely a column and a half in that Time magazine, and put
it together with coines of Der Spiegel, and put it out in front of
the students and do that.
'My. Wiggins. You are drawing the line based upon the use — I am
talking about the intended purpose. Spiegel and Time are not intended
primarily for instructional purposes.
]Mr. Freitag. Those Time magazines that come to us are intended
for student class use.
Mr. Wiggins. Time publishes the mazagine for purposes other than
classroom purposes. Of course, it may be used for that purpose. I am
302
not talking about the use so much as the intent in the publication. You
have casebooks for example, Professor, and it seems to me that those
casebooks are prepared for your use almost exclusively ; and that is the
only market that the author has. If you erode that market, it is
really immaterial vrhether you are profit or nonprofit, because he caters
only to that market.
Mr. Kaskind. The students do buy the casebooks, and our mem-
bership of the 6,000 law teachers includes people who do get substan-
tial royalties. There is recognition that the main purpose in publish-
ing is to transmit one's ideas, and to get the nonpecuniary status of
recognition, and so on. We do not undercut the casebook. Each of us
assigns a casebook, and we use that. We are talking about the mate-
rials that are so broad and that are available outside the casebooks.
We are not undercutting.
Mr. Wiggins. You are recognizing, in a sense, that some published
works are published with the purpose and intent of being used for
instructional material. It does not matter whether it is used by a non-
profit institution or not. Tlie fact is, it is intended to be instructional
material. The only profit that the author makes is in the market.
Mr. RosENFiELD. Mr. Wiggins, let me give you an example specifi-
cally so we can get to something in the nature of your law casebook.
Let us take a biology textbook. It has a picture of a frog. Each one in
the class has bought — either the school or the students — the book;
they have it in front of them. They want to mark this picture to show
certain things. Thei'e are a variety of ways of doing this. You can take
a machine which does not reproduce this permanently, but puts it
on the wall. Nobody can mark on that as the teacher is talking. You
can make a Xerox or other kind of a copy — in deference to Xerox, we
will say a photocopy.
Mr. Wiggins. Of a frog?
Mr. KosENFiELD. Of the picture of the frog in the biology text-
book— and then, as the teacher is talking, the student will mark up
some things so that he or she can understand it better and study it.
Notice, our proposal says brief excerpts which are not substantial
in length in proportion to their source. What good is it to the pub-
lisher to forbid that biology teacher in the laboratory from running
off 25 copies of that diagram or that picture from books that everybody
has, but they do not want to deface, so that they then can play with
it as they work on it ? And what we are suggesting to you is that we
do not want to copy that whole book. It would be absurd for us to
copy it. We may want to copy the diagram.
Mr. Railsback. Would you yield ?
Mr. Wiggins. I yield.
Mr. Railsback. Let me just ask you ; does not section 107 protect
you now ?
Mr. RosENFiELD. Frankly, we do not know. We do not know, and the
answer is that the Supreme Court did not know, the Court of Claims
did not know, and in part the difficulty is that tlie language of tlie
fair use provision is couched in economic terms. We are not involved
in an economic competitive picture.
Mr. Railsback. Let me just suggest to you, after reading section
107, it does not just deal with economic use. The four factors to be con-
sidered: (1) The purposes and character of the use, (2) the nature of
303
the copyrighted work, (3i) the amount and substantiality, and (4)
then the effect upon the — what the fourth one does, the other three do
not.
Mr. KosENFEELD. The report of this committee said the fourth was
the principal one.
Mr. Railsback. That is not our report.
Mr. RosENFiELD, This is the report of the Senate committee.
Mr. Railsback. Do not pay any attention to the Senate.
Mr. RosENFiELD. May I make one more, one more observation be-
fore I yield to my colleague ? We have had meetings with the various
other groups involved with this from the other side, and invariably
they say to us, if the thing that you want to copy represents a major
expenditure cost for us, then the answer is no ; so that it is not quite
as simple as looking at this. Our concern comes from the fact that
we have been told in certain major instances that we cannot do it.
If you tell them we can do it, it may make a difference.
Mr. Wiggins. I am just trying to flush out the wisdom of an idea
here. I gather from this interest that this is not a very good idea, to
try to create a special rule with respect to instructional materials. Is
that a fair consensus ?
IMr. RosENFiELD. lu effect, that is what we are asking for. We are
asking for a special rule for instructional materials, with research and
scholai-ship included. We are saying that we think that we are in the
public interest, different from the commercial community. That is
why we have submitted to you a proposal that would make a different
rule, precisely as you have said.
Mr. Wiggins. To the authors of works intended for instructional
use, you are the commercial community.
Mr. Raskind. We really seek the function ratlier than the materials.
It troubles me a bit, if I understand you correctly. Congressman Wig-
gins. We do not seek to label materials. For example, to get back to
my example of copying a multi-volume service, say, in the tax field,
in a tax course, that was designed for research purposes, it has inter-
pretative materials. To take a copy and put it in the hand of a student
may illuminate a class hour. By doing so. A, we are not taking instruc-
tional materials from copyright. We would not do that with a case
book. By and large, the issue is not the material ; it is the function for
which it is used, and it is material that very frequently, if not always,
is not designed for instructional use that we seek to enrich the class-
room.
Mr. Wiggins. You have been helpful to me. I will not abandon this
entirely. But, I will want to think about it some more.
INIr. WiGREN. It would seem to me we are in the position of creating
markets for that author. If we take the small excerpt and quote it for
class use, and even duplicate it so youngsters may see this and read it
and say. gee, I would like to read the whole book, we create interest
in these kinds of materials. So I think we in a way are really advance
men or salesmen, in a sense, for books of this kind that youngsters
then Vv'ould want to have in their own libraries as they grow older.
Mv. WiCxGiNS. You are the wrong one making the argument. The
author of the book should be making that argument.
^ Mr. WiGREN. Many of them do. They are not as much interested
m the money that they get from the work as they are in the idea
that their ideas are being used.
304
Mr. Wiggins. I will listen carefully when the authors come up.
Mr. RosENFiELD. Some of the authors in Willianis tfi Wilklns said
they were more interested in distribution.
Mr. Raskind. One of the large commercial publishers of the Federal
Tax Service gives our law school, and any law school in the United
States, that ask, one set for every 10 students, on the theory that if you
allow the library to have these free, since we cannot afford to buy them,
the students will get used to them while they are students. When they
get out and practice, there is a recognition there.
]N[r. Wiggins. I understand that there is truth in what 3'ou say.
Mr. Kastenmeier. The gentleman from Massachusetts.
Mr. Drinan. Thank you, Mr. Chairman. I wonder if anj'one who
chooses would respond to the rej3roduction of music. We are going to
have testimony here later on, and the Music Publishers Association
says widespread unauthorized photoduplication of our music could
sap the lifeblood of our business; making the familiar argument that
multiple copies for a band or orchestra iji its school erodes their busi-
ness. Who would want to respond to that ? There are a few people in
this room that have a slight interest in this matter.
JNIr. Wigren. Unfortunately, the Music Educators National Confer-
ence are not here today, and I cannot respond. Let me say in general,
I think their position would be that ceitainly, there ought to be some
opi:)ortunity, in the case of music, for youngsters to be able to listen
to themselves, to make a tape of their perfoi mance. so that they can
listen for self-evaluation purposes. This certainly ought to be allowed.
Certainly, they are not asking for permission to use materials and have
them in an auditorium situation, v/here people are charged admission.
I think they have some very unique kinds of concerns that they will be
expressing to you. I know this whole matter is very important to school
j^eople right now; the business of being able to evaluate your own per-
formance, listen to yourself.
Mr. Drinan. That is not the point I was asking.
INIr. Wigren. It is the use of music materials.
Mr. Drinan. Under any exemption, you peoi)le are saying that a
part or whole of short works can be produced; and it should seem to
me that a teacher for a band, under an exemption here, could quite
l)roperly, I should think, reproduce that, and the band will play it, and
the traditional royalty that goes to the composer simply will not be
paid. What is the answer to it? Is that the ultimate intention or effect
of the exemption that is being sought ?
Mr. Wigren. Again, I think the umsic educators would have to
answer this. I think they would say they simply do not want to deni-
grate any concern of that type on the part of the music publisher. In
fact. I think they have been very closely working with them.
Mr, Drinan. "Professor Easkind, did you Avant to comment?
Mr. Raskind. I think that is outside the scope of what I woidd con-
sider, and I think our group would consider, to be fair use. That is not
educational if the band is jilaying i]i concei-t. They are not learning how
to play, and I think that is an improper taking of the proprietor's
rights, what we are talking about. If thcv are lear-ning about fugues,
and there is some music about the fugue that would be instructive for
classi'oom purposes, some of that may be taken, but not for a
performance.
305
]Mr. Drixax, If that is outside the scope, I am sure the music pub-
lishers will be happy to hear that.
Let me shift to authors. Several authors earn a major portion of
their income by licensing the reproduction of their poems or articles or
short stories for anthologies. They fear, and testimony will be given
later this morning— they fear if a teacher, without paying the usual
small fees that go toward antholog3% if a teacher reproduces for learn-
ing purposes, then the market for such collections of short stories or
poems will be eroded.
Mr. Freitag. I would like to say, I perceive right away the use of that
kind of thing for me, and I hope the exemption would include it. There
is a time when some songs are also viewed as poems in one language or
another, several that are used in class ; and if I find an American vei'sion
of that poem that strikes me as being insightful to the student, and
make copies for them and put it alongside the German version, and we
start to look at the adequacy of one language over another — which is
more beautiful, which says something that the other cannot possibly
say — I would hope that the exemption would continue to give me the
right to do that for a short work.
Mr. Drinan. How about the individual author who otherwise, ex-
cept for the exemption, would be getting a small fee, and that is the
basis of the copyright privilege; that it is in the Constitution, accord-
ing to their argument that really you have not responded to? Their
argument is, this little fee I get rewards my creativity ; and this exemp-
tion, even for nonprofit or religious groups, should not take away that
which the Constitution gives me.
Mr. Freitag. I perceive two possibilities. Number one, the published
item might occur in a cultural workbook, which I can buy for the
department, and then do; or number two, I would have to go some
kind of fee route, which in all likelihood I would suspect would mean
I would have to decline using it.
Mr. Drinan. That is no answer. You are saying, we will not give
him any money. What does this copyright mean to him? You have
just taken the copyright away.
Mr. Freitag. I thought I was speaking to the exemption for educa-
tional purposes.
Mr. Djunan. You keep asserting that it is good because it is good.
It is not good for the owner of the copyright.
Mr. RosENFiELD. The answer is it would not be used. The result is,
that neither the students nor the author profit. That is the real explana-
tion of this. When Mr. Frost read his poem at Mr. Kennedy's inaugura-
tion, the next day every school in America turned to Frost's poems.
If they had had to buy the Frost poems first of all, they would haA^e
to buy the whole set. They do not sell one volume. If they had to buy
them, they would not have used them. Mr. Frost would not have gotten
anything. The students of America, would not have been enriched by
the Frost poetry. Who would have gained in that instance? Neither
Frost nor the students.
Mr. Drinan. Are you telling me that thev just went and reproduced
the poems of Robert Frost without buying the book, and without giving
him the copyright ?
Mr. RosENFTELD. That is right. Schools around the country took
the poem and studied it the next day.
306
Mr. Drinax. Just that one poem ?
Mr. RosENFiELD. Either that or one other poem, but not the Frost
volumes. They may have taken another poem to show the beauty of
the Frost style. I am trying to meet your point head on ; I hope I am.
Mr. Drinan. You are not doing very well.
Mr. EosENFiELD. Let me try again. You are asking, what about the
royalty to the author ? The answer is, he would have gotten no royalty
anyway. It would not have been used.
jNIr. HoGAN. I recently had the chance to serve as an advisory editor
for a high school/ junior high school anthology series. There are a
number of new poems in those anthologies. As I recall, the permission
fees of those across the board were about a quarter of a million dollars.
In most of the new poems that find themselves in anthologies, to be
honest with you, Father, were probably Xeroxed and tried out in
classes here and there, to see if they would be satisfactory. And having
been found that they were, the authors are now making money they
would not have otherwise.
Mr. Drixan. If you carried your exemption through, that quarter
of a million dollars would never get to the authors. You have trapped
yourself. Come on — you are saying that schoolteachers advertise these
poems. Pretty soon, people sa3% that is a nice poem ; and under your
logic, this poem now will make it into the anthology, but there will not
be any royalty fee.
Mr. HoGAN. I think, if I recall correctly, we were saying one of the
things we agreed on is not making domestic anthologies available.
Mr. Drinan. I am all for the diffusion of knowledge. But there are
a lot of authors and composers out there. They are going to testify.
I just wanted you to meet the argument as head on as you can. You
want the diffusion of knowledge. They want the same thing, but with
their own particular, constitutionally protected rights guaranteed.
Mr. Frettag. Mr. Drinan, I kind of sense the presumption that we
really wanted to do all this duplication. As a teacher, I really do not.
Mr. Drixan. I used to be in the business. I had that temptation all
the time. Right, Professor Raskind ? I did as much as I could.
Mr. Freitag. Temptation aside, what I do not have is the time
to go through all that, and I go to the Xerox and run it off, and have it
nil done. There is a lot of ticky-tacky I can do without. I also do get
on the phone and talk to the publisher, and say, what is lacking in this
edition is — cannot we do something about it? Sure enough, I can
say with some success that revisions have incorporated our ideas, and
we bought this edition and stopped having to go out and do it on our
own. I think a very valid case can be made for trying out in the
classroom what does work. Perliaps under an exemption, we can even-
tually effect its inclusion in the textbook which we really choose to
buv, workbook or so on.
Mr. Drinan. That is really no answer to sav, let us try it out : maybe
we will popularize it. One last point before m.y time runs out. I would
suggest to you centlemen, insofar as you can concentrate on the fun-
damentals, I do not thinic you all aifcree with the NEA-proposed
statute here. I am not certain you would all agree with what Professor
Raskind says. He savs no injuctive relief whatsoever. In the eight
things that are here, if you could somehow have a statute upon which
307
your 39 organizations agree. That certainly would give us a focus on
how we are going to go on this thing. Thank you very much.
Mi\ Kastenmeier. The gentleman from New York, Mr. Pattison.
]Mr. Pattisox. Thank you, ]Mr. Chairman.
I feel a little bit like Alice in Through the Looking Glass, when
the Queen, as you will recall, said when I use a word, it shall mean
exactly what I intend it to mean, nothing more or less. I think that
is our problem here for the definition of the word, "fair" use. I would
like to get to a couple of examples that were used. The one example
that was used about the occasion where the law professor wanted to
use a i^articular article, and asked the author for permission. The
author said, that will be $150, and they decided not to use it. It seems
to me that goes to the very basis of the copyright law- If the author
says to you he does not want you to use it for anything less than
$150, is that not his perhaps frustrating privilege to do that? Has it
ever been in the copyright law that we say, we are going to determine
what somebody is going to charge ? Suppose somebody does not want
it to be used at all? Suppose I have a poem I do not want anyone to
use, to publish anywhere — I am ashamed of it ?
Mr, Easkind. That is a balance of interest. Society has an interest;
Congress has in many instances legislated, as in the Higher Education
Act, a shared resource use — as Father Drinan says, a balance of abso-
lutes. Our position is, over the period of time, a fair use doctrine will
(a) meet that interest by allowing the students to have the material,
and (h) in the long run, some of them would become subscribers, or the
librarj^ will become the purchaser of one more subscription. It is not
a zero-gain situation for the people who have the proprietorship. We
are mindful of it and sensitive to it.
Mr. Pattisox. 'Wlien we get to the question of whether tlie price
is fair, is not the alternative to that to say somebody fixed the price
somewhere along the line? We either fix the price, as you say, or the
author sets the price — in a ridiculous way. perhaps.
]Mr. Rasktnd. That raises a troublesome issue. If you allow full
sweep as to price, the result you get is not socially desirable. That is
the issue.
Mr, Pattison-, Let me get to another issue. In Mr. Freitag's state-
ment, he talked about teachers, authors, to say they are as much
interested in seeing their works used and their ideas disseminated, and
I agree with that. As a politician, we do not get too many copyrights
for things. We say our interest is in having those ideas disseminated,
and we publish a lot of things. "VVliat is to stop an author who_ feels
that way to simply insert a waiver into his work and say, permission
to copy is granted : and that is done lots of times, is it not ? Would that
not solve the problem, is that let that author make up his mind about
that?
Mr. WiGEEX. Yes, it would. In fact, in many of our educational pub-
lications, we are putting on the verso page at the bottom that any
part of this may be copied as needed for instructional purposes, but
that we would appreciate being given at least credit as to the source.
We are practicing what we preach in this particular instance here,
because we think that is important. The dissemination of knowledge
and the access of information, in a free society, is an all-important
thing. It may be true, as you said before, that an author can say,
308
I do not want someone to use my work. Still, there is such a thing
as having all kinds of materials available, source materials, in the
public interest. It is whether or not you consider the copyright to be
an intellectual property right as such. I know that is the case in
British law. I am not so sure it is in our law. You may want to speak
to that.
Mr. Pattisox. Is that not the fundamental decision you make,
when you say you are going to create a monopoly interest on the part
of a person who creates something, and allow him to give permission
or not, or conditionally, or any other way he wants — and what tlie
object of that will, in fact, result in more dissemination of information
and more creative activity going on than if you give him no right at
all or give him a limited right ?
Mr. KosENFiELD. The courts have answered that very clearly. The
statutes until now, until this moment, give a presumptive exclusive
monopoly. Presumably, you are not allowed to use one word. The courts
have said that is silly. It is not in the constitutional objective, which
is dissemination ; and therefore, the courts have developed the doctrine
of fair use, the purpose of which is dissemination. And what we are
suggesting to you is that we are not talking about monopoly or no
monopoly. We think that, with due respect, is not the issue that you
yourself are proposing. The issue really is, what is the nature of the
usable portion of the material, irrespective of the presumptive monop-
oly ? And on that score, if an issue is couched in those terms, that it
is not exclusive, then the author cannot refuse, no matter how much he
wants. Once he has taken advantage of statutory copyright, he cannot
refuse fair use, no matter how much he wants to.
Mr. Pattison. We are adopting the concept of fair use in this statute.
That is not the question. We have a situation here that I posed, where
presumably someone thought that it was not fair use, or it probably
was not fair use. They asked the author for permission. He said no.
Mr. RosENFiELD. That is exactly what happened in Williams S
Wilkins.
The thrust of your questions, if I may respectfully indicate, would
be to put the burden on the copyright holder by saying let him settle
the price. We are saying to the degree it is fair use or exemptible, the
publisher has no control.
Mr. Patttson". We agree completely on that concept, except no one
seems to agree on what fair use is. I am posing the question — assuming
it is not fair use and you ask the publisher, the author, if in fact you
can use his piece, and it is not under the fair use doctrine, then the
objection was made that his price was too high ; he did not therefore
benefit, and the students did not benefit.
I am presuming as a part of my question that it was not fair use.
Mr. RosENFiELD. Let us go back.
If, under whatever the rules are, it is not fair use, we may fuss
at you because it is not fair use.
Mr. Patttson. Not under this question, because it is a given.
Mr. RosENFiELD. If it is not fair use, the author has a right to control
the price. We are not arguing about that.
Mr. Pattison. Fine.
INIr. Freitag. I would like to relate to you a question that brought
up that point in terms of duration of a copyright — the concern that
309
I liave that the life of the author pkis 50 prevents the author from
having a second choice to decide whether or not he wants to continue
the material under copyright. Anybody from the minute they publish
can freely grant the right to anyone to use it all along.
Let us say a copyright does exist. It is a valid copyright and must
be respected. The 28 years, which must then be renew^ed, and which is
renewed in only 15 percent of the cases, gives to the author, the copy-
right holder, a chance to decide whether this should go into the public
domain or not. Life plus 50 really locks it up.
Mr. Pattisox. We could create that rather simply by saying that
after a period of time a notification goes to the author ; if you do not
clioose to renew it or wisli to withdraw your copyright, let us know.
That could be done very simply.
Mr. Freitag. The pending legislation includes life plus 50.
INIr. PATTisoisr. It may be a good idea to require the author to state
his age and state of health at that point.
One other question. Suppose someone is so foolish to decide they
are going to open up a school on a profit basis, for a variety of reasons.
Maybe they do not I'eally expect to make a profit. Certainly they would
not if they had any intelligence. Let us suppose they want to do it for
a variety of reasons — they want that form of operation rather than
having — having the kind of form of operation j^ou have with a non-
profit corporation that has a lot of legal constraints in it. You want
to open up a school for profit. There are many of course. What is the
difference if we have the same school. We are two schools ; one under
one form — nonprofit w'ith a board of directors, and tries to raise
money from the public ; the other profitmaking, which may or may not
make a profit. Actually, what is a proprietary operation ; what is the
difference to the student ?
Mr. WioREN. We are not asking for this limited exemption for any
commercial school whatsoever.
Mr. Patttson. Why not ?
Mr. WiGREN. We think the nature of the use is such that if they
are a commercial operation, unlike a nonprofit institution, they there-
fore should pay. They get money from their students to operate the
school.
Mr. Pattison". So does Cornell.
Mr. WiGREN. In the other instance, these are public schools ; for the
most part they are parochial.
Mr. Pattison. I have a hard time making that distinction. I may
choose to send my child to a school which is very successfully being run
by a profitmaking operation and cheaper, let us say, than the nonprofit
school. Let us say that the tuition at the profit school is $500 a year,
and at the nonprofit school the tuition is $6,000 a year. That is per-
fectly possible.
Mr. WiGREx, Do you not think tax law distinguishes betw^een them?
Mr. Pattison-. For a variety of reasons, but not based upon what you
do at the place.
I am iust wondering — there are not many proprietary schools.
Mr. EosENFrRLD. Is that not why, exactly, the tax law distinguishes?
The tax law distinffuishes because in one the teacher does not make
personal profit, and in the other the proprietor does depending upon
whether or not his business is profitable.
310
In other words, in one you have a situation in which the copyrighted
material is being used to make a buck ; and in the other, you are not
giving that kind of purposeful use. That is precisely why the tax law
distinguishes — the tax law and the Congress. The Congress makes
certain benefits available to nonprofit institutions of education which
it does not make available to profitmaking institutions.
Mr. Pattison". Are we not talking about the dissemination of infor-
mation, and how it is disseminated ; we do not really care, do we ?
Mr. RosENFiELD. Yes, w^e do.
We are saying for the purpose of this special exemption, just as
Congress has said we are going to support nonprofit higher educa-
tion or lower educational institutions and nonprofitmaking ones, we
are saying that the Congress, in its wisdom, ought to make special
rules for the nonprofit, noncommercial utilization of this copyright
material and let the commercial one go on its own.
What we are trying to point out in a sense is that the ad hoc com-
mittee refuse membership to profitmaking schools that are excellent
schools for this very reason. It is not that we are thinking of it as
an afterthought. This was a fundamental distinction between the
profit and the nonprofit in the character of the use involved.
As a matter of fact, Mr. Congressman, 107 itself speaks of the
purpose and character of the use. The purpose of the use in a profit-
making institution is to make a buck. Sure you make a buck by
disseminating education to the students. The purpose is to make a
buck.
Mr. Pattison. Maybe. I can form a number of corporations, not-
for-profit corporations, with a small group of people involved, a not-
for-profit corporation, and charge tuition, and not make a profit at
all, because we just adjust our salary dependent upon what we make.
There is no profit at all. It comes out to zero at the end of the year-
You can do the same thing with a for-profit corporation.
You are not going to tell me if a for-profit corporation incurs a
loss, in the time that they incur the loss, you are not going to let them
off the hook.
I think the distinction is based upon the use, not upon the nature
of the institution. That is all.
Mr. RosENFiELD. We thought we were asking for less than you were
pushing us to.
Mr. Kastenmeier. We thank those representing educators here this
morning, and educational uses, and the copyright bill. We thank you
for vour very helpful testimony.
The Chair would now like to call those who represent publishers — ■
Bella Linden, Paul Zurkowski, Ernest Farmer, Irwin Karp, and
Edward Meell — to come forward.
The Chair would like to express regrets that it is so late in the
morning in reaching you. There has been, evidently, a very profound
interest in the subject from the questioning of those who preceded
you.
Nonetheless, your testimony is equally valuable to us and sought
after. I only regret that it is late. Perhaps hereafter we can make other
adjustments.
Ms. Linden ?
[The prepared statement of Ms. Bella Linden follows :]
311
Statement of Bella L. Linden, Attorney, New York, N.Y.
Mr. Chairman, I am Bella L. Linden, partner in the law firm of Linden and
Deutsch, New York City. I was counsel for many years for the American Text-
book Publishers Institute (until its merger with the American Book Publishers
Council into the association known as Association of American Publishers),
a member of the Panel of Experts appointed by the Register of Copyrights to
consider revision of the Copyright Law, and a member of the Committee on
Science and Technical Information (COSATI) of the Federal Council for
Science and Technology and Chairman of the COSATI sub-panel on rights of
access to computerized information systems. My firm represents Harcourt
Brace Jovanovich, Inc. and Macmillan, Inc., two of the five largest American
educational publishers. However, I appear here today not on behalf of Macmillian
or Harcourt alone, nor solely on behalf of educational publishers. Rather, I am
here in the interests of our system of educational authorship and publishing,
representing the sum total of the combined creative efforts and investments
of the authors and publishers of this country's educational materials.
Tliis statement is respectfully submitted in opposition to the proposal for a
general educational exemption to the rights of authors and publishers established
in H.R. 2223. Eight years ago, in your Committee's analysis of the doctrine of fair
use as established in the Revision Bill and, in particular, its application to
educational and classroom use, your Committee concluded that " a specific exemp-
tion freeing certain reproductions of copyrighted works for educational and
scholarly purposes from copyright control is not justified." [H.R. Rep. No. S3, p.
31] At last week's hearings the Register of Copyrights stated that your report
"still remains the basic legislative explanation of the content of the Bill, and
the [basis from which] the reports succeeding it in both Houses have all been
drawn * * *." During the intervening years, the only relevant fact to have
changed is the further proliferation of devices for unauthorized, inexpensive
and rapid duplication, use and transmission of copyrighted works.
Yet, we find ourselves still debating the request for the so-called "educational
exemption."
At bottom, of course, this dispute is based on economic interests. Authors,
publLshers, educators, librarians, all must live on a budget. I will certainly
concede that anything which may be acquired free of charge imposes no burden
on a budget, so it is not totally unnatural for users of copyrighted materials
to desire unpaid-for duplication privileges. Textbook budgets are extremely low,
amounting, on a national average, to between two and three percent of a
school's annual budget. Photocopying equipment and other reproduction, storage
and retrieval devices are not part of a school's textbook budget, but come
under the broad umbrella of "supplies." Thus, the natural and laudable tendency
for good teachers is to seek supplementary material via the Xerox and tape
machines. Less laudable however, is the insistence of some that authors and
publishers should not be paid for such uses of their works.
Throughout the revision program the authors and publishers of educational
materials have agreed with the principle of full and prompt access to copyrighted
material for educational use. This is the very reason for their creative efforts and
existence. Clearly, there is a significant difference between access to educational
materials, which we wholeheartedly support, and unpaid-for duplication of these
materials.
We have continually offered to work with the proponents of the educational
exemption, as urged by your Committee in 1967, "to work out means by which
permissions for uses beyond fair use can be obtained easily and quickly and at
reasonable fee.s." [H.R. Rep. No. 83, p. 33] In fact, in my first appearance before
your Committee in 1965, I offered a specific proposal for a clearing house system.
However, for almost ten years — during which time many educators have loudly
and justifiably voiced their demands for adequate compensation for their own
services — the proponents of the educational exemption have sought a statutory
basis for the replication of copyrighted educational materials without payment.
Rather than accept our invitation, those in favor of the educational exemption
offer a provision for sweeping appropriation of copyrighted works. They commonly
illustrate their so-called plight by referring to the individual school child who
wishes to copy an article from a newspaper for a homework assignment. We are,
in effect, told that because the patient has a headache, the cure is to chop off his
head.
Authorship of an educational work usually entails many thousnnds of hours
over a period of several years doing library and other research, field testing and
312
consultiug. The authors of educational works are not highly publicized personali-
ties who write best sellers and appear on television talk shows. Many are prac-
ticing teachers. Few become rich as a result of their writings. To the extent that
it is possible to describe a typical textbook author, he or she is a member of the
faculty of a highly regarded college or university, enjoys an excellent reputation
in his or her held, but is little known outside of it and counts on copyright royalties
to pay for braces for the children's teeth, a second car for the family or a vacation
or study year abroad or some similar expense. More often than not, royalties on
educational works are split between several authors.
By and large, it is the publisher who discerns educational needs, searches out
and selects the author (or, more commonly, group of authors) to create the books
and materials to satisfy the requirements of schools and universities, and directs
and supervises the planning, design and creation of the works. The publishing
venture generally encompasses continuing review and evaluation by numerou.s
teachers and curriculum specialists, supervisors and consultants and field testing
throughout the country. The role of the American educational publisher combines
and coordinates various functions of writing, artistic design and technical skills
in applied research, packaging, consulting and training as well as manufacturing,
marketing and distribution.
Educational materials today are commonly produced in sets or programs in-
tegrating various forms and media such as texts, teachers' manuals or editions,
filmstrips, slides, sound recordings, cards, charts, puzzles, instructional games,
duplicating masters, transparencies, testing materials and the like ; similarly,
these programs frequently represent the entire range of literary authorship includ-
ing fiction, non-fiction, prose, poetry, music and drama. It is not at all uncommon
for an educational publisher to invest more than one million dollars in pre-
development costs alone for the creation of a program which will take five or
ten years to reach the market and another three to five years to gain acceptance
and even begin to pay of£ the investment. In the case of one elementary and
junior high school science program with which I am familiar, a total of fourteen
years elapsed between the time the program was conceived and the first textbooks
were published. The program virtually revolutionized the format and content of
elementary school science books. The efforts and investments of authors and edu-
cational publishers do not stop upon publication, as subsequent editions are con-
tinually revised in light of feed-back from the field and changes in publishing
techniques.
Commonly, major portions of the expenses of educational publishing are
attributable to payments made to other publishers and authors for the use and
integration of portions of prior works in new programs. In the case of one recent
elementary reading program, permissions fees paid by the publisher exceeded
$100,000 and, it is estimated, comprised more than 30,000 permissions granted.
The administrative "burden" of clearing the permissions did not impair the
development of the program.
We cannot emphasize often enough that many of the products of educational
publishing, such as treatises, texts, workbooks, tests, file cards, anthologies,
encyclopedias and other reference works, are designed for use in piecemeal
fashion rather than cover-to-cover reading. To permit unauthorized photo-
duplication of copyrighted works for the purposes of teaching, education and
research is a request, in unalloyed English, to permit the educational com-
munity to engage in on-demand reprinting, on a daily basis, of those portions
of copyrighted educational, scientific and technical works which they wish
to use and to circumvent payment to authors and publishers whose entire
market for such works is that same educational community.
In many respects educational publishing exists apart from other businesses.
The authors and publishers of such works are in a very real and es.sential
sense engaged in public service. For education Itself to progress, educational
authors and publishers must anticipate and effectively serve a broad range
of instructional and scholarly needs. To continue to serve this function in
today's society, they must be adequately remunerated for the duplication of
their work product.
Although on a short term basis an "educational exemption" may appear
desirable to some as aiding the budgetary ills of the educational community,
it is clear that the longer term consequence would be to discourage authors
and publishers from investing in the creation and distribution of educational
materials. The only alternative which comes to mind is the nationalization
of educational publishing. Among the ways our society has avoided suppi-ession
313
of intellectual work-product are the system of economic incentive to writers
provided by copyriglit and tlie free-enterprise publishing system which en-
compasses multiple outlets for distribution. Thus, authors are encouraged
to publish their thoughts, and the views of an author which may be antithetical
to one publisher (or be considered by him to be unpublishable for economic,
competitive or other reasons) may still i-eceive exposure through publication
by another.
If applied to the free storage (input) of copyrighted materials in computer-
ized information systems the proposed exemption would be in complete dero-
gation of the judgment of both Houses of Congress as expressed in the
recent passage of a law establishing a National Commission on New Tech-
nological Uses of Copyrighted Works. One of the stated purposes of that
Commission is to study, compile data on, and make recommendations to Congress
concerning "the reproduction and use of copyrighted works of authorship . . .
in conjunction with automatic systems capable of storing, processing, retrieving,
and transferring information * * *."
Proponents of the educational exemption have repeatedly emphasized their
"educational" purpose and its relation to the public welfare. Of course educa-
tion is in the public interest — ^but under our system this interest is served
by a private and commercial enterpri.se which requires a profit to survive. The
injury to this country's educational system, educators, scholars, and school
children will be material under the erosion of copyright which will result
from the proposed exemption. This was fully recognized by your Committee
in 1967 when, after considering arguments for a specific educational exemp-
tion extending beyond fair use. it stated :
'•The fullest possible use of the multitude of technical devices now available
to education should be encouraged. But, bearing in mind that the basic con-
stitutional purpose of granting copyright protection is the advancement of learn-
ing, the committee also recognizes that the potential destruction of incentives
to authoriship presents a serious danger." [H.R. Rep. No. 83, at p. 31]
TESTIMONY OF BELLA L. LINDEN, EEPEESENTING EDUCATIONAL
PUBLISHERS
'Ms. Linden. Thank you, Mr. Chairman.
I shall not read my statement at all, but submit it for the record,
the reason being that everything that I am saying in my statement,
and I dare say everything that the educators have said this morning,
we have all been saying for the past 10 years, at least.
Consequently, in order to save time, all I would like to do is point
out specifically five or six — actually it adds up to seven — statements
that i would particularly like to draw to your attention.
One is that the position of the educational community, as repre-
sented by the people who testified here this morning, and by the
librarians who testified yesterday, 10 years ago was that photocopying
is done in a very limited way. Ten years ago they said that copying
cost 50 cents a page; therefore it is cheaper to buy a book than to
photocopy a book; therefore it is cheaper to buy a journal article or
reprint, or buy the journal instead of doing the photocopying.
Nothing, with all due respect, has changed in the course of the 10
years with respect to the philosophy of the purpose of copyright. All
that has changed is the rapid proliferation of technological devices
for replication— tape, Xerox equipment, so on and so forth, and in-
formation storage and retrieval systems.
The proliferation of all this has met in the eyes of the educators-
it would seem that because there is a more rapid technique of achiev-
ing the dissemination of information, the payment should be limited
to the technology.
57-7SG— 76— pt. 1 — —21
314
No one here has ever spoken to the Congress that they should
insist that the Xerox equipment or tape equipment should be given
to the nonprofit institutions gratis. What they have all insisted upon
is that the intellectual material, without which the technological
dissemination hardw^are w^ould be relatively useless, should be given
gratis.
Again, I say with great sadness, we see awe and respect for tangible
property, and we see less than respect for intellectual creativity, which
in my view, may I suggest — and I am sure it is shared by all here —
is the cultural and most valued part of the heritage.
I would also like to point out that what you are doing is not evaluat-
ing a WUVtams & Wilkins case of past transgressions where the issue
is limited to one publisher and certain specific issues. You are being
asked to legislate exemptions with respect to all future creativity.
You are being asked to suggest a system of modifying the creation
and packaging of intellectual information for the educational and
research community. You are being asked — ^there will be no cata-
clysmic disappearance of future creativity overnight. If you do pass
these educational exemptions, what you will have created is the grad-
ual but inexorable erosion of the competitive entrepreneurial produc-
tion of intellectual material for the education and research com-
munity of this country at the very least.
One or two of you noted very aptly that the educational material —
I will hand out some — ^that consist of 150 items in a children's reading
program of all kinds of nonfiction, small portions included. That
is the entire market for the educational producers and the duties
of material. I will not dwell on that point.
I would merely like to add that yes, as the educators have said
this morning, it is a question of budget. What they have reference
to is the intellectual property budget, which is 2 or 3 percent, at the
most, of the entire school budget. They are not talking about the
teachers' salaries or carpeting or Xerox equipment. All they are talk-
ing about is the minuscule proportion of the budget that goes for
intellectual property.
With respect to the problems of fair use, may I suggest, with
all due respect intended, fair use, as I sat and listened to the great
diflEiculties of defining fair use, it occurred to me — and I mean no
disrespect to this committee or to anyone in this room — if the good
Lord had promulgated the statement, love thy neighbor before this
comniitteo at the time of Genesis, you would still have people here
defining what love is, seeking guidelines witli respect to which neigh-
bors are intended to come under the stricture to love thy neighbor,
and there would be a rising clamor for exemption of certain neigh-
borhoods from the statement of the good Lord, because it was in
the public interest to exempt those neighborhoods.
May I suggest in all seriousness, there is no precise language in any
statute of any kind that has ever been promulgated that is not subject
to different interpretations. That is why, thank the Lord, there is a
315
legal profession, and thank the Lord that is why there are congresses,
and that is why there is ongoing revision of statutes, just as the
act of 1909.
Mv. Kasten3IEier. I would point out if the bill before us had
been in effect at the time, and He had set it down alreadj^, the Lord
would still have life plus 50.
Ms. LixDEx. That is true. We also gave it to Mary Baker Eddy,
if you recall.
May I suggest, furthermore, that fair use, like all other statutory
language, is susceptible to interpretation. We all know what love
thy neighbor means, whether we obey it or not. We all know what
fair use is, and we all know what the four criteria are.
May I also call to your attention that the bill now before you has
a series of compromises of exemptions, which we have reluctantly
accepted, because this is the era of compromise. This is the era where
people have less regard for private intellectual enterprise than they
did generations ago. AYe accept it. We are willing to live, survive, and
struggle mider it. We are asking for survival of the private intellec-
tual authorship and publishing industry.
In conclusion, may I say that if any of you would be good enough
to look at my testimony given before this very committee in 1965,
we did in fact offer a clearinghouse. We made the point then — we
make the point now — we have made it continually. We are agreeing
that the copyright law is intended to grant the right of access. We
are agreeing that access is the essence of intellectual information and
is the whole purpose of publishing and production of audiovisual
materials.
What we are saying, under our form of government, and our phi-
losophy of free dissemination of competitive ideas, we do not wish
to end up in a decade or so with a nationalized educational ])ublishing^
system and with limited authorship under that kind of a budget.
I want to include my one statement — yes, we sympathize that the
educators and librarians have problems balancing their budgets. We
all do. And we know that if any of us could only get for free that
which we in our society have to pay for, we would find it a much more
easy task to balance our budgets. May I suggest that the librarians and
teachers budgets should not be balanced at the expense of this intellec-
tual property which is essential to their ongoing teaching process.
That, I submit, is in the public welfare.
Thank you.
Mr. Kastexmeier. Thank you, ]\Is. Linden, for a very strong-
statement.
The Chair will personally say it is good to have you back after 10
years. Having seen you a number of times in the context of copyright,
you have made enormous contributions in the field.
Next, JSIr. Meell.
[The prepared statement of Mr. ^Meell follows :]
316
Statement of Edward Meell on H.R. 2223 on Behalf of the Educational
Media Producers Council
Mv name is EdAA-ard Meell and I am Chairman of the Educational Media Pro-
•ducers Council (EMPC) and Editorial Director of the Film Division of McGraw-
Hill Book Company. I am appearing here today on behalf of EMPC and with
me is Ivan Bender. Chairman of the EMPC Copyright Committee and Assistant
Secretary and Legal Counsel of the Encyclopaedia Britannica Educational
Corporation.
We are here to present our views on H.R. 2223, the general copyright revision
bill, and specifically on the issues involved in the educational use of copyrighted
:audio-visual materials. We support the bill as introduced and oppose amendments
which would weaken the protection provided in the bill for audio-visual materials.
SECTION 107 — fair USE
We specifically endorse Section 107. which writes into statutory law the main
principles of "fair use" as that doctrine has been interpreted by the courts in
individual cases over the years. We feel that Section 107 represents a fair com-
promise between the creators and users of copyrighted educational materials —
a compromise which has been carefully negotiated over the past several years.
Our industry is pleased with the recent technological developments which
promise to make ideas and information more accessible to scholars, teachers
and learners. These developments promise also to expand the role and contribu-
tion of educational media producers to the educational process of which we are
an integral part. But in order to maintain and increase the incentives for the
creation and production of quality materials for our schools, we must not diminish
the statutory protection for intellectual products to which any author, creator
or artist is entitled.
NO need for an "educational exemption"
At the time that this testimony was prepared we were uncertain as to whether
a broad educational exemption, to be added to the bill as it now stands, would be
proposed by one or more organizations in the light of the positions taken by the
Association for Educational Communications & Technology (see Attachment A).
The language of previously-introduced amendments, however, in our view pro-
vided far more than a "limited" exemption. Among other things it would authorize
use— for noncommercial teaching, scholarship and research — not only of "brief
excerpts" from copyrighted works but also of the whole of short literary, pictorial
and graphic works.
Let us take up these two concepts in order, as they would apply to educational
audio-visual materials.
The concept of "brief excerpts" (which are not substantial in length in propor-
tion to their source) is very difficult to apply to educational audio-visual mate-
rials. A half hour education nature or biology film, for example, may be built
around an exceedingly difficult photographic sequence which may take months
of work to capture, but may in the final product only take uj) a minute or two
of time in the film. To permit this minute or two to be reproduced freely und^^r
an educational exemption would very likely destroy the economic viability of the
product.
The concept of exempting use of "the whole of short, literary, pictorial and
graphic works" presents difficulties equally great in relation to audio-visual
materials. For example, is a short filmstrip a short work? Is a five minute audio
cassette a short work? Is an eight minute 16mm film a short work? If so, it would
very largely destroy the entire market for short filmstrips, cassettes or films, and
they would be produced in extremely small numbers or not at all.
We trust that this subcommittee will not accept the idea of an educational
exemption, if such an exemption should continue to be pressed by one or more
organizations. If the exemption is adopted, few companies will lie able to risk
making the capital and time investments needed to produce educational mate-
rials and will turn tlieir efforts to other kinds of products and markets. In such
a situation, it might well happen that only with government su))sidies could the
producers in the private sector afford to finance the development and distribution
of educational materials.
317
Such an exemption bas no educational rationale. To the extent that school
systems wish to reproduce educational audio-visual materials in whole or in
part beyond the limits of "fair use," our members stand ready to discuss licensing,'
arrangements which will permit authorized reproduction. Modern methods of
reproduction for many types of audio-visual materials are such as to make such
reproduction in whole or in part attractive to some school systems and many of
our members have already entered into licensing arrangements which would
permit duplication under a negotiated compensation formula.
ENDORSEMENT OF SECTION 107 BY AECT
We are pleased that the principal professional organization of educators di-
rectly concerned with the use of audio-visual materials in the educational process
is also in support of Section 107, without wealieniug amendments. This support
WHS expressed in a statement issued by the Executive Committee of the Associa-
tion for Educational Communications and Technology (AECT) in May of 1975.
( See Attachment A. ) Some of the statements made by the AECT which were of
greatest interest to us were the following :
1. "AECT endorses tlie criteria to be used in the determination of 'fair use' as
contained in Section 107 of the proposed bill.
2. "Concerning the use of copyrighted works in conjunction with television,
AECT proposes that 'fair use', as it has been outlined above, should apply to
educational/instructional broadcast or closed-circuit transmission in a nonprofit
educational institution, but not to commercial broadcasting.
3. "Once the doctrine of 'fair use' has been established in the revised law,
negotiations should be conducted between the proprietor and user prior to any
use of copyrighted materials that goes beyond that doctrine.
4. "A new copyright law that both users and producers can view as equitable
depends upon the mutual understanding of each other's needs and the ability
to effectively work out the differences. We will participate in the continuing
dialogue with the Educational Media Producers Council and similar interest
groups to establish mutually acceptable guidelines regarding the boundaries of
•fair use', and reasonable fees to be paid for uses beyond 'fair use.' "
LIMITED LIBEARY REPRODUCTION NOT APPLICABLE
After conducting hearings in 1973, the Senate added subsection (g) to Section
lOS (Library Photocopying), to define and place limits on "systematic reproduc-
tion" which exceeds "fair use" or permissible use under other subsections of
tlie bill. Subsection (h) was also added, exempting musical works; pictorial,
graphic or sculptural works ; or motion pictures or other audio-visual works
from the reproduction rights granted in Section 108 except for providing archival
copies or replacing a damaged work.
We feel both subsections are vitally important — (g) because it defines rea-
sonable parameters for copying; and (h) because it is necessary to ensure the
continued creation of the special kinds of works mentioned above. Because of
the nature of audio-visual works — that is the manner in which they are used and
the fact that one film, filmstrip or recording serves multiple numbers of users
during each use — it is manifestly unfair to extend the rationale behind Section
108 to these materials. Each library traditionally buys only one or two copies of
a film, filmstrip or sound recording. The library market is an important source
of business to producers, though very limited. To permit copying of these audio-
visual materials under Section 108 is wholly unnecessary to meet the librarians'
need for some freedom to copy some literary works to effectively serve their users.
Section 108 would, if extended to audio-visual materials, severely and irrevocably
remove the library as a market for audio-visual producers.
LIAISON WITH OTHER EDUCATIONAL ORGANIZATIONS
E]MPC has mounted a strong effort to establish and maintain dialogues with
users of educational materials over the last three years. We have cosponsored
over two dozen panels during state, regional and national meetings of educa-
tional groups to explain the producer's point of view and to listen to the educator's
needs. Attachment B illustrates the fonnat and content of these discussions. One
of the most important results has been the development of licensing plans by
major educational media companies to increase school districts' access to ma-
terials in an economical fashion.
318
Members of the Council have also worked with individual school systems to
•"develop guidelines for observing fair copyright practices. Over one dozen short
articles on copyright, as it applies to audio-visual media, have been prepared for
educational journals. These articles have been reprinted and distributed free of
charge by EMPC to all interested individuals, schools and school systems. Sev-
eral examples are attached as Attachments C, D and E.
In cooperation with AECT, EMPC is now in the process of preparing a booklet
explaining the procedures for obtaining permission to dupliccite if the need ex-
ceeds the limits of "fair use."
We believe all these activities have been helpful to both educators and copy-
right proprietors in both clarifying general principles and in solving specific
problems. EMPC pledges to continue these efforts irrespective of the passage of
any revision of the copyright law.
THE EDUCATIONAL AXJDIO-VISUAL MATERIALS INDUSTRY
In order to understand fully the unique nature of the educational audio-visual
industry, and tlie importance of copyright protection to tlie continued develop-
ment and distribution of high quality materials, a brief description of the
industry is in order.
The Educational Media Producers Council (EMPC) is an organization within
the National Audio- Visual Association made up of approximately 100 producers
and distributors of audio-visual materials for use in scliools, colleges and libraries.
These member companies create, produce and market items such as motion picture
Hlms and video tapes, filmstrips, slides, transparencies, and isonnd recordings.
We estimate that our members account for over 80% of the annual production of
audio-visual matei-ials for use in American education.
In 1974 total income from sales and rental of educational audio-visual materials
amounted to $277 million. This volume was produced by some 200 companies ;
and thus, since the 100 EMPC members account for approximately 80% of
annual production, the industry is clearly one of active competition among
quite small firms. In fact, 50% of our member companies gross less than ,$1
million per year ; 90% gross less than $."» million.
The relative volume of the various products sold in 1974 is shown in the
following table :
1974 sales of educational A-V materials
[Millions of dollars] =:
16 mm. films and videotapes :
16 mm. films $63. S
Videotapes 1. g
Subtotal 64. 9
Materials acquired for use and storage in individual schools :
8 mm. films (silent) 7.7
8 mm. films (sound) .6
Filmstrips (silent) 1.5. 3
Filmstrips with records 23. 2
Filmstrips with cassettes 36. 0
Overhead transparencies 11. i
Glides 2. 1
Records 5. 5
Recorded tapes :
Reel-to-reel 1. 9
Cassette 1.5. 6
Study prints 9. 5
Multimedia kits 62. 2
Games, manipulatives and realia 18. 8
Subtotal 209. 3
Grand total 274. 2
It will be noted this list of products is divided into two principal categories :
16 millimeter educational films and videotapes, which are comparatively lengthv
and expensive and thus usually bought by school district film libraries, stored
319
centrally, and circulated on demand to individual schools ; and "building level
materials" — other types of materials which tend to he used more often and more
intensively in the individual schools and therefore are purchased and stored by
them rather than by a district library. With the increasing use of audio-
visual materials in the educational process, and with the recent trend toward
the individualization of instruction, this second category has been growing much
more rapidly than the first in the last few years, increasing from 66.5% of total
audio-visual sales only six years ago to 75.6% of the total sales in 1974.
USE BT LEVEL OF EDUCATION
Equally important to an understanding of the educational audio-visual indus-
try is the pattern of use at the several levels of education. Sales of 68 representa-
tive companies can be broken down as follows :
1974 educational A-V sales by type of institution
Percent
Public schools 77. 5
Private schools 4. 4
Colleges and universities 7. 6
Public libraries 3. 9
Churches, government, business and industry, etc 6. 6
Total 100. 0
The percentage in these tables bring out two points quite graphically :
1. The only market for those materials is the educational market ; they have
no market among consumers in general or for general entertainment.
2. Sales to schools tend to be concentrated in the lower end of the grade level
pyramid, with over 60% of total sales to the elementary schools, less than 30%
to high schools, and less than 10% to higher education. Public libraries account
for less than 4% of all sales and "all other" for 6.6%. Thus, the kinds of con-
siderations which come into play in discussing library photocopying of highly
sophisticated, original research materials are not pertinent here; our com-
panies' materials are used for the instruction of students at hasic levels of
education.
SMALL VOLUME
The vast majority of audio-visual materials are not used in one-to-one situa-
tions as are textbooks. They are used generally in groups. This raises two points.
First, the number of copies needed is quite limited. One or two copies of a 16
millimeter film may serve an entire school system of moderate size ; a single
copy of a filmstrip or sound recording will serve an entire school. Second, a
typical audio-visual product will customarily sell relatively few copies over a
period of five to ten years, as compared to the tens or hundreds of thousands
of copies of a textbook. A 16 millicneter film may sell only several hundred copies
over its useful life ; a $50.00 set of filmstrips does well to sell four thousand.
Thus the recapture of initial investment in research, development, editorial and
production work — which costs as much for one copy as for thousands — is spread
over the sale of a relatively limited number of copies. In addition to the sub-
stantial initial investments necessary for production of quality materials, there
must be added operational expenses for the considerable period of time over
which sales are made before a break-even point is reached. The combination of
these factors — limited market, small volume and sales over an extended period —
means that specific broadening of the "fair use" criteria could damage bevond
repair the quality and diversity of materials available to our nation's students
and teachers.
THE U.S. OFFICE OF EDUCATION EXPERIENCE
The U.S. Ofiice of Education has granted millions of dollars over the years
to government-funded educational research laboratories for developing innova-
tive and more effective teaching methods and materials. Many good products
were developed, but far too few ever were disseminated to the educational com-
munity. As a result, policies were developed by USOE which allowed commercial
companies with marketing expertise to distribute the materials under protection
of a limited (in time) copyright. Not imtil then did the educational community
receive the benefit of the Federal research effort.
320
This points out very clearly the need to provide incentive to producers and pro-
tection for the rights of copyright holders. The Federally-funded materials which
were developed and put on shelves now have a much better chance of being used
by, and benefiting, the intended recipients — because those with the expertise
necessary to make the materials available are given appropriate incentives.
WILLIAMS & WILKIN S CASE
The 4-4 tie vote of the Supreme Court in the Williams & Wilkins case, leaves
the issue of "fair use" in an unsettled state. We believe that Congress must act^
clearly and explicitly — to outline the boundaries of this doctrine for all parties
concerned. Once this is accomplished, EMPC commits itself to continue its efforts
to work with educational institutions and organizations to establish guidelines
to help resolve specific situations within the parameters set by Congress.
SUMMARY AND CONCLUSION
In summary let us repeat that we think that the bill which has been intro-
duced as H.R. 2223 is a good bill and a workable bill, from the point of view both
of the creators and the users of educational audio-visual materials, and we urge
that it be expeditiously reported to the full House without amendments to Sec-
tions 107 and 108. If an educational exemption is added to Section 107, or the
provisions of Section 108(g) and (h) are weakened, EMPC could not support
the bill. It is universally recognized that revision of the 1909 copyright sta.tute is
imperative, and the sooner this is accomplished the better for all concerned.
We appreciate this opportunity to appear before your subcommittee. My col-
leagues and I will be glad to elaborate on any points in our testimony which the
members of the subcommittee may wish to explore further.
Attachment A
COPYRIGHT law REVISION : A POSITION PAPER BY THE ASSOCIATION FOR EDUCATIONAL
COMMUNICATIONS AND TECHNOLOGY, MAY 1975
The members of the Association for Educational Communications and Tech-
nology (AECT) believe that technology is an integral part of the teaching-learn-
ing process and helps to maximize the outcomes of interaction between teacher
and pupil.
Regulations governing United States Copyright were originally developed to
promote the public welfare and encourage authorship by giving authors certain
controls over their work. It follows that revisions in Title 17 of the United States
Code (Copyriglits) should maintain the balance between providing for the com-
pensation of authors and insuring that information remains available to the
public. Some of the revisions proposed in S. 22 and H.R. 2223 lose sight of this
balance between user and producer.
AECT endorses the criteria to be used in the determination of "fair use" as
contained in Section 107 of the proposed bill :
Section 107. Limitations on exclusive rights : Fair use
. . . the fair use of a copyrighted work, including such use by reproduction in
copies or phonorecords, or by any other means specified by (Section 106), for
purposes such as criticism, comment, news reporting, teaching, scholarship, ru-
research, is not an infringement of copyright. In determining v/hether the use
made of a work in any particular case is fair use the factors to be considered
.shall include :
(1) the purpose and character of the use ;
8 (2) the nature of. the copyrighted work ;
(3) the amount and substantiality of the portion used in relation to the copy-
riglited work as a whole ; and
(4) the effect of the use upon the potential market for or value of the copy-
righted work.
However, we propose that the concept of "fair use" should apply equally to the
classroom teacher and media professional — including specialists in audiovisual
and library resources. Media personnel are becoming increasingly important
members of educational planning teams and must have the assurance that they
may assist classroom teachers in the selection of daily instructional materials as
well as" with long range curriculum development. Classroom teachers do not
always operate "individually and at (their) own volition." The fact that the
media professional makes use of advance planning and has knowledge afore-
321
thought of the materials he prepares for the teacher should not invalidate the
application of the "fair use" principle.
Concerning the use of copyrighted works in conjunction with television, AECT
proposes that "fair use," as it has been outlined above, should apply to education-
al/instructional broadcast or closed-circuit transmission in a non-profit educa-
tional institution, but not to commercial broadcasting.
Once the doctrine of "fair use" has been established in the revised law, nego-
tiations should be conducted between the proprietor and user prior to any use of
copyrighted materials that goes beyond that doctrine. We believe that the enact-
ment of the "fair use" concept into law prior to negotiations will guard against
the erosion of the concept. Generally, a reasonable fee should be paid for uses
that go beyond "fair use," but such fee arrangement should not delay or impede
the use of the materials. Producers are urged to give free access (no-cost con-
tracts) whenever possible.
We agree with the Ad Hoc Committee of Educational Organizations and
Institutions on Copyright Law Revision that duration of copyright should pro-
vide for an initial period of twenty-eight years, followed by a renewal period
of forty-eight years, whereas the proposed bill sets duration at the "life of the
author plus fifty years." It seems reasonable that provisions should be made to
permit those materials which the copyright holder has no interest in protecting
after the initial period to pass into the public domain.
Regai-ding the input of copyrighted materials into computers or other storage
devices by non-profit educational institutions, we agree with the Ad Hoc Com-
mitee that the bill should clearly state that until the proposed National Com-
mission on Xew Technological Uses of Copyrighted Works has completed its
study, such input should not be considered infringement. The proposed bill states
only that ". . . (Section 117) does not afford to the owner of copyright in a work
any greater or lesser rights with respect to the use of the work in conjunction
with automatic systems . . ."
A new copyright law that both users and producers can view as equitable
depends upon the mutual understanding of each other's needs and the ability to
effectively work out the differences. We will participate in the continuing dia-
logue with the Educational Media Producers Council and similar interest groups
to establish mutually acceptable guidelines regarding the boundaries of "fair
use." and reasonable fees to be paid for uses beyond "fair use." This dialogue
will be especially important in the area of storage, retrieval, and/or transmission
of materials during the time period prior to the issuance of the report of the Na-
tional Commission on New Technological Uses of Copyrighted Works.
We feel that the above modifications of R. 22 and H.R. 2223 are needed to in-
sure that the revised law assists rather than hinders teachers and media .special-
ists in their work.
Attachment B
preface by the california association for educational media and technology
and educational media producers council
The issue of copyright is an important one in our countr.v today and is of
special concern to everyone in the educational community. With the advent of
recent technological developments, the ability to duplicate, store and transmit
audio and visual materials has sharply increased. These developments promise
to make ideas and information more accessible to all learners, teachers and
scholars — and this is the goal we all seek.
But the transmission of these ideas and information must be handled in a way
that encourages, stimulates and rewards the creation and production of intellec-
tual products — and that is the basis for copyright protection.
The basic copyright laws in effect today were passed in 1090. In lO-'-j, at-
tempts to produce a general revision of these laws were begun but, with the
exception of a bill passed in 1972 to extend protection to sound recordings,
these efforts have not succeeded as of the time of this writing. Legislation is
pending at the present time in the Senate and, if passed, must be considered and
approved by the House of Representatives.
This filmstrip and discussion guide are not intended to answer technical
questions about copyright law. Rather, they are designed to stimulate discus-
sion about some common types of questions and to provoke thought about the
basic issue of copyright protection — with its moral and ethical implications.
Guidelines are presented for helping to determine conditions under which mate-
322
rials may or should be copied. Basic to such a determination is the concept of
"fair use" which means the free and legal reproduction of copyrighted works
for purposes such as criticism, comment, news reporting, teaching, scholarship
or research. In the pending legislation, four criteria are set forth for estab-
lishing fair use :
1. the purpose and character of the use ;
2. the nature of the copyrighted woi-k ;
3. the amount and substantiality of the portion used in relation to the
copyrighted work as a whole : and
4. the effect of the use upon the potential market for or value of the
copyrighted work.
(These criteria are provided, on a detachable page, in Appendix B. )
The discussion guide which follows contains hypothetical examples of dupli-
cation of audio-visual media. It would be useful to keep three questions in mind
as each of the situations in the guide is reviewed.
1. Is the theory of "copyright," as set forth in the Constitution, upheld?
("To promote the Progress of Science and Useful Arts by securing for
limited Times to Authors and Inventors tJie exclusive right to their respec-
tive Writings and Discoveries.")
2. What are the economic implications to the publisher of copying?
3. How will they affect the availability of materials to the educational
community ?
Both educators and producers of educational media seek the widest and most
effective dissemination of learning resources. It is hoped that this specific edu-
cational tool will assist in implementing our mutual objective with benefit to all.
Copyright and Audio-Visual Mb^jia
1. A school district buys one copy of a 16mm educational film and makes ten
video cassette copies for individualized instruction at various school media
centers.
This case illustrates a clear-cut example of copyright infringement resulting
from utilization of new technology. The copyright laws forbid the reproduction
of a copyright work by anyone except the copyright proprietor. The fact that
the school district bought the copyrighted work does not mean it bought the rights
to reproduce it.
2. A mobile media unit regularly travels from school to school in a district and
converts phonograph records into audio cassettes for individual teachers.
Unauthorized duplication of sound recordings may subject the school district
to legal liability. The United States Congress enacted the Sound Recording
Amendment to the copyright laws, which protects recordings fixed subsequent to
February 15, 1972 and prior to January 15, 1975. The proposed revision of the
copyright laws now pending in the Congress of the United States provides for full
protection of sound recordings. In addition, a decision by the U.S. Supreme
Court (Goldstein v. U.S.) upholds the right of states to enforce their own record
piracy laws in effect prior to the 1972 date.
3. A teacher makes excerpts in cassettes from various record albums owned by
the school to illustrate comparisons among various musical forms.
In addition to the statements made in Case 2, another factor to be taken into
consideration is copyright in the work which was recorded. However, the pro-
posed revision to the copyright laws will give full protection to the record itself,
not merely to the underlying work. Another factor involved in this case is the
doctrine of fair use. One should consult the statutory provisions regarding fair
use (see Api>endix B) and discuss their ramifications for this case.
4. A school media center coordinator salvages some useful frames from dis-
carded filmstrips and converts them into slides for student use.
Although technically copying is not involved in this situation, other factors
must be taken into consideration. For example, the filmstrip producer may have
only .secured filmstrip rights for visiials which had to be procured outside of its
own facilities. Another problem is co-mingling of these visuals with those from
other sources so as to create a "derivative work" — which is one of the rights
reserved exclusively to the copyright proprietor. The fact that the school has
"discarded" the filmstrip does not mean that copyright protection has expired.
5. A student taping a report on new travel books in the school library used
Around the World in Eighty Days as background music.
323
The issue presented here involves the appropriation of a copyright miLsical
composition. However, this situation might be comparable to an individual taping
musical works in his own home for his own personal use and might not be re-
garded as an infringement.
6. A school district occasionally makes a videotape of a preview print of a IGmm
film in order to allow teachers to preview it over a longer period of time.
The issue being presented here is the unauthorized duplication of a copyright
work. This is illegal, regardless of the fact that this particular use of the-
videotape may seem to be less harmful to the copyright proprietor than a situa-
tion in which the videotapes w'ere used for student viewing. It would be advisable-
to seek permission from the copyright proprietor before proceeding.
7. A high school student uses an opaque projector to enlarge a map from lus
younger brother's geography book to help him draw a poster showing the location
of Indian reservations.
This would seem to he a clear example of fair use as defined in the preface-
AVhen Is It Legal To Duplicate Duplicate Duplicate?
<By Ivan Bender and David Engler ^)
"Making copies" has become almost a way of life for educators — as it has in
most businesses and industries. However, conscientious teachers and administra-
tors, recognizing the impact that widespread unauthorized duplication will have
on the production, availability and cost of educational materials, are anxious to
know what is or is not allowed by law.
The concern goes beyond a fear of "getting caught." It extends to the sense
of fairness and respect for property that schools are striving to develop in their
students. And when the material in question is the result of artistic effort — as is
the case \sith most audio and visual materials — a special urgency exists to ensure
that the creative process does not become a financial dead end.
More than api^eals to morality and justice, educators need specific guidelines
as to what can or cannot be legally duplicated. AVhile a full explanation of the
intricacies of copyright law is beyond the scope of Media d Methods, several impor-
tant provisions of that law can be examined.
The U.S. Constitution (Article 1, Section 8, Clause 8) empowers Congress "ta
promote the progress of science and the useful arts by securing for limited times
to authors and inventors the exclusive right to their respective writings and
discoveries."
Under a 1909 copyright law now in effect, and through subsequent interpreta-
tions, almost all intellectual products of a literary, artistic, or creative nature
can be registered for protection with the Copyright OflSce of the Library of Con-
gress. Thus, such diverse products as books, maps and poetry, magazines and
newspapers, plays and choreographies, lectures and sermons, melodies and lyrics,
paintings and photographs, sculpture and architectural plans, motion picture
films, videotapes and sound recordings can be covered by an exclusive copyright.
Once oMained, the copyright remains in effect for 28 years and can be renewed
for an additional 28 years. Beyond this total period of 56 years, the work falls into
the public domain and its use becomes unrestricted. An important exception
applies to copyrights which would have expired beginning in 1962, the year when
Congress undertook its still-uncompleted revision of the 1909 law. Since the new
law will probably lengthen the period of copyright, Congress is extending, on a
year-to-year basis, those copyrights that would have expired since 1962.
What protection does copyright provide? Basically, it reserves for the proprietor
the exclusive right to print, reprint, publish, copy, and vend the copyrighted work,
including any abridgements, arrangements, dramatizations, adaptations and
translations. The right to vend in this case means the right to transfer by lease
or sale ; therefore, if someone copies the work without authorization and gives
the copies away free, they may be infringing on the proprietor's opportunity to
vend by taking away the exclusive right to do so.
Infringement on a proprietor's copyright can invoke specific statutory penalties,
ranging from $100 to $10,000 per infringement. Although penalty monies go to the
state, proprietors can recover damages in a civil suit if they can show economic
loss.
1 Ivan Bender Is Assistant Secretary and Legal Counsel for Encyclopaedia Britannica
Educational Corp ; David Engler is President of General Educational Media. They are also
chairman and vice-chairman of the Copyright Committee, Educational Media Producers
Council.
324
Referring hack to the Constitution, it is clear that incentives for producing
creative works are preserved by securing certain rights for the proprietor ex-
clusively. Over the years, however, these exclusive rights have been tempered by
a growing body of judicial decisions which have increasingly attempted to bal-
ance the authors' need for compensation with the public's need for access to
creative worlds. The courts have eased up on strict compliance with the law
through a concept now known as the "Fair Use Doctrine." This doctrine is not yet
delineated in statutory law, but Congress more than likely will include guidelines
for the application of "fair use" in its revision bill.
Because present statutory law does not spell out specifically what constitutes
copyright infringement, case law (i.e., judicial findings based on individual cases)
has filled this void by recognizing certain uses as fair, even without permission
of the copyright holder. Under case law, "fair use" applies only to reproduction
for such purposes as criticism, comment, news reporting, teaching, scholarship or
research. It encompasses four conditions, all of which must be met if duplicating
or ch:Tnging a product is to fall within the bounds of fair use. These standards are :
1. The purpose and character of the use. — The use must be for such purposes as
teaching or scholarship, and miist be non-profit. Fair use would probably allow
teacliers acting on their own to copy small portions of a work for the classroom,
but would not all^w a sf^liool system or institution to do so.
2. The nature of the copyrighted work. — Copying portions of a news article may
f;ill under fair use, but not copying from a workbook designed for a course of
study.
3. The amount avd substantiality of the portion used. — Copying the whole of a
work cannot be considered fair use ; copying a small poi'tion may be. At the same
time, however, extracting a short sequence from a 16mm film may be far different
than a short excerpt from a textbook, because two or three minutes out of a 20-
minute film might be the very essence of that production, and thus outside fair use.
Tender normal circumstances, extracting small amounts out of an entire work
would be fair use, but a quantitative test alone does not suffice.
-'i. The effect of the tire upon the poteniial untrlTf for or rrilue of the copy-
righted work. — If resulting economic loss to the copyriglit holder can be sliown,
even making a single copy of certain materials is an infringement, and making
multiple copies presents the danger of greater penalties.
To re-emphasize, the fair use doctrine applies only when all four of the above
points have been satisfied. Even so, it is often difl^cult to reach a conclusion on
the fair or unfair use of a product, particularly in the case of audio-visual mate-
rials. By posing a number of everyday examples which occur in schools and
media centers around the country, and evaluating each in terms of what can
and cannot be duplicated, pei'haps additional light will be shed on the provisions
of thf" copyright resulntion';.
E.rample. — A school district buys one copy of a IGmm film, and makes 10
vidcocassette copies for individualized instruct'on.
Evaluation. — .Tust making one copy of the film is a clear-cut A'iolation of copy-
right : making 10 copies only aggravates the violation.
E.rample. — A mobile media Tinit which regu^nrly travels from school to sfbool
in a district converts phonograph records into audiocassettes for individual
teachers. " ' . • .'■ ^
Evalnation. — Tn one sensp the copyright question involved in this sitnntinn is
simple and straightforward. AnyoTie who rrnularly converts conyn'srhted phono-
graph records into audiocassettes without the co])yright owner's permission is
violating the law. However, this situation may be complicated by the fact tliat
copyright protection of sound recordings made before February 1-^. 1972 did not
apply to the recording itself, but only to the underlying work, such as a song
or poem. If this underlying work had no copyriglit protection and was therefore
in the public domain, th.on a duplication made before V^T2 is not a violation of
coiiy right. Apart from this exception, converting a phonograph record into an
audiocassette is a violation of copyriglit even if the person doing the copying
owns the record. Also, since the entire work is being copied, fair use standards
would not be met.
E.rample.- — A student taping a report on new travel books in the school library
uses tlie music from Around the World, in Eiijhty Days as background.
Eraliiation. — We cannot conceive of any copyright owner objection to thi.s
kind of use.
E.rample. — Upon the request of several schools, a district media center uses
material appearing in an encyclopedia to prepare sets of color slides illustrating
the evolution of the American flag.
325
Evaluation. — This is probably fair use, giveu the nature of the material's
coutent and the relationship of this portion of the encyclopedia to the total work.
Example. — A school videotapes various educational and commercial telecasts
off the air for playback at more convenient times during school hours.
Evaluation.- — 'N'ideotaping copyrighted television programs off the air for any
purpose is a violation of copyright. Permission of the copyright owners should
be secured before such videotapes are made.
Example. — A school district occasionally makes a videotape of a 16mm pre-
view print in order to allow teachers a longer period of time to preview it.
Evaluation. — This is illegal unless permission is granted in advance. Some
educational producers are granting the right to make videotape copies for pre-
view purposes only as long as the videotape is erased immediately after pre-
viewing and does not become a regular part of the school district's film collection^
Example. — The Department of Televised Instruction of a school district tele-
vises 16mm educational films from its library over its closed circuit system to-
every school witliin the district.
Evaluation. — The fundamental issue here is whether or not this practice
constitutes a "performance" as defined under the present copyright laws. In all-
likelihood, it would be so considered. Since the right to perform a copyrighted
work is granted exclusively to the copyrigh holder, appropriate permission must
be obtained in advance of televising the material. Most educational film pro-
ducers have television licensing policies which are easily obtained from each
individual producer.
Tlie producers of copyrighted materials are anxious to accommodate the needs
of their customers in education. For this reason, many companies and individuals.
have developed licensing policies which permit limited reproduction of copy-
righted materials. Each contract is worked out on the basis of user needs and
producer fee schedules to permit duplication beyond "fair use." Already, some
school districts — Granite School District in the suburbs of Salt Lake City, for
example, and Fairfax County School District in Virginia — have entered into
voluntary licensing arrangements.
This is a healthy trend. It enables the educational users to have greater flexi-
bility and access, while at the same time providing producers with compensation
and some degree of control over their materials. Additional information ors
licensing contracts can be obtained by writing: Educational Media Producers
Council, 3150 Spring Street, Fairfax, Virginia 22030.
Editorial
academic rip-off
(By Henry C. Ruark)
An unethical practice is underway in some educational circles. Educartors, not
"money-hungry commercial types," are responsible for this one.
The operation in question is worked quietly, with little open comment by either
those engaged directly in the operation, or by those it is supposed to benefit).
Neither group wants to think too clearly about it.
Those involved know, in their hearts, if not in their heads, that what they are
doing is wrong, both morally and legally. There have been too many profes-
sional educational statements, too much open discussion and far too many articles
and explanations in the educational press for anyone now to claim total ignor-
ance of the issue.
Probably many of those involved would resent being categorized as "spe-
cialized thieves.'' right along with counterfeiters, short-change artists,, second-
story men, and pickpockets.
Yet too many persons do not hestitate to make use of the creative products
of professional efforts by their own colleagues, without payment or credit.
Those paragraphs first appeared in the Blue Book Editorial for August. 1969.
titled "If The Shoe Fits . . ." We were castigated then for calling educators
"thieves" ... a word which did appear in the Editorial . . . and "pirates" . . .
a word which did not. We suggested that "If the shoe fits . . . we iiope it pinches."
What we were really doing then was recognizing, realisticnlly and openly,
the early symptoms of a cancerous practice which now threatens learning media
development much more dangerously than it did then.
Only now, instead of isolated (if alarming) incidents, the practice of unau-
thorized copying of learning media, greatly facilitated by technological develop-
326
ments, has grown to an amazing variety of physical formats, in alarming quart-
tities of both copy-count and titles-involved.
This illegal practice — that's exactly what it is and there's no point in sugar-
coating theft no matter who "pulls the job" — has become such a threat to the
learning media producers that it is perhaps the hottest issue under discussion
In the AY field today.
What is truly at stake is not simply the "profit" a producer makes from the
sale of his product, but the great loss of legitimate reward for, first, creativity
in developing effective and appealing new AV materials, and second, entrepre-
neurial effort and risk-taking to bring them, at economically feasible pricing, to
educators and learners.
Within our free-enterprise system, despite all its drawbacks, controls, barriers,
-and pitfalls, there is literally no other way for effective learning media to be
•developed, tested, marketed, and disseminated.
Thus, copyright abuse and what must be done about it is an immediate and
highly crucial problem, which must be solved before the learning media field
can move ahead witli basic distributing — be it through cable and satellite TV,
touch-tone telephone networking and centralized computers for home and office
reference and learning, or more immediately through videocassette and similar
playback systems ... in extension of or as replacement for the heavy current
inventory of film formats.
How can any of these developments, touted for years as the rise of "educa-
tional technology." even begin to become a reality until and unless broad col-
lections of learning materials can proceed towards immediate availability on
a reasonable, practical, profitable return-on-investment basis?
Without tliat kind of return, how can producers create materials to supply
'Current needs, and at the same time look ahead and plan for the kinds of busi-
ness risk-taking which are inevitable, unavoidable procedures in any kind of
husiness?
We believed in 1969, and we believe even more strongly now, that educators
generally are not so stupid as to deny by their own actions the basic principles
of morality and the practical and very pragmatic lessons of our flourishing free
entrepreneurial system. That's what happens when any educator, at any level,
condones or in any way assists in the simple theft of product, a commonplace
result of questionable practices widespread today.
It doesn't take much effort to understand what is going on when $2,000 worth
of AV materials are kept for a solid year, then returned, piecemeal and in very
bad shape, most obviously used and re-used . . . with the explanation "we
couldn't tell whose materials these were." There were defaced but still legible
labels on every package, and company name and logo on every visual. That's
substitution for purchase by abusing the previewing privilege.
It takes little effort to get the message when a preview print of each of a
whole series of films is, first, circulated among CA'ery school in a district witli
no previewing reports turned in. and then, second, dubbed onto videocassettes
before the preview prints are returned . . . with a straight-faced letter of thanks
"for the preview service." Put your own label <m that one ... we have, already.
It is simple theft of product.
Incidents such as these are well-known and discussed in many places; in
fact, the problem is so acute in some places that the professional associations,
either covertly or openly, have made their dismay and forebodings known by
■warnings to members who are believed to have participated in this "academic
rip-off" activity.
It should be noted that the Educational Materials Producers Council has
taken very positive action on this problem of copyright abuse, by formulating
their Policy Statement which appears on page 10. We also carry in this issue
an explanatory feature detailing the thinking which went into development
of their policy statement. EMPC welcomes discussion, opinion, and a vital
dialogue on the problem in all its facets.
It should also be noted that EMPC has publicly announced that a committee
of industry leaders is working diligently towards solution of this painful situa-
tion in a variety of ways . . . with one way being to build what has been described
elsewhere in the educational press as a "violations file."
Copyright and all its implications and interpretations is a very tortuous
field, in and of itself; l)ut there can be no doubt of the effect, nor of the legal
standing, of those practices to which we are pointing herein, and much earlier
in "If The Shoe Pinches . . ."—in 1069.
327
The most effective and least costly distribution-dissemination system may
well wipe out both producers and AV services as we know them today.
BUT, whatever the substitute or development, there will still need to be
creative, entrepreuueurial development of effective materials.
Without reward there will be no such development, whether "commercial types"
or "educator types" are involved. Theft denies reward.
He Who Comments Last
GOLDEN EGG PRODUCTION : THE GOOSE CRIES "FOUL"
(By Robert Churchill')
PuUishcr's Comment. — The development in recent years of high-speed,
high eflaciency duplication equipment in almost every mode imques-
tiouably poses problems for producers. But I would like to suggest that
it is a challenge for consumers as well, on another level. W^hat can be
copied? Almost anything in print, on film, tape or records. What may
be copied? Almost nothimg that is protected by copyright, because the
right to make copies belongs to the author or the producer. Seems clear
enough, doesn't it?
But — with the kids' real best interests at heart, doesn't the impover-
ished educator have the right to steal a loaf of media bread to feed his
hungry horde? If you are tempted by this reasoning, what about another
(luestion — do the members of this same horde also have the right to
.satisfy their needs by acquiring without benefit of purchase procedures
a book, a beer, a pack of cigarettes, a salami ?
Teen-age pilferage is even more rampant than VD. I wonder whether
for teachers to steal the works and rights of others by duplication with-
out authorization is any more or less exemplary than teacher fornica-
ticm in the cafeteria ?
Today's sophisticated duplicating capacity can be duplicitous. Let's
not be duped ourselves into breaking the law, esi>ecially when thousands
of kids are observing us.
— Roger Dam id.
I am a goose with tears in my eyes. People laugh at me in the street. Children
stick out their tongues. A big grown up goose. Crying!
It's about these eggs that I lay. Our eggs . . . well, maybe golden is too strong
a word, but with out-of-pocket production costs averaging about $20,000 a film,
nobody is eating them for breakfast.
What's all this crying nonsense? It's about videotape duplication. It's about
a very real concern of producer-distributors that they will be forced out of
business if educators duplicate 16mm films without authorization.
This article isn't going to belabor the illegality of \adeotape duplication
under the copyright law or even the ethics of a little benign larceny (after all,
it's for the benefit of the children, isn't it?). Rather let's examine the eco-
nomics of egg production and why there soon may be no more eggs.
I will have to speak, of course, from the experience of our own small com-
pany, but I believe that it is reasonably representative. Let us assume that
we produce a film for $20,000 and sell prints for $200. About 65% of that $200,
give or take a few percents, pays for print costs, distribution (including pre-
view prints), and overhead. The 35% pays off the production cost. In our
example, production cost would be recouped with the sale of 285 prints.
Sounds like a great little enterprise, you say. Only 285 prints before we
begim to make a profit. Ah, but it will take us two and a half to three years
before we have sold 285 prints. You thought that this was big business, that
we sold thousands of prints? No, film companies will sell perhaps 500 to 800
prints during the life of an average film. That's all.
Further, most of that 35% "profit" after the first 285 prints is what we use
to produce new films.
The educator's position is that 16mm prints are so expen.sive that they can
afford only a fraction of their needs. Why then couldn't videotape duplica-
tion solve the problem of providing all those extra copies that schools so
desperately need?
If a fee is paid to the producer for the right to make copies, it's quite
possible that the producer can still make a living and the schools can at last
1 Robert Churchill is President of Churchill Films. 662 N. Robertson Blvd., L.A., Calif.
90069.
328
have as many copies of a film as tliey need. Personally, I profoundly hope
that this will happen. Today films are too rare, too hard for the teacher to get.
Availability will cause a great increase in use, understanding of the medium
and consequent further demand. Eventually I suspect that the producer will
benefit as more funds are channeled into a teaching medium that has finally
come alive.
Let's leave the heady vision of tomorrow's cornucopia long enough to notice
that the last paragraph begins with an if. If on the other hand, the producer's
films are duplicated without compensation, soon there will be no films. The
goose is dead.
It works this way. A producer counts on a number of purchasers who buy not
just one print, but from two to ten or more. Also, after a few years many
users will replace a print that has worn out. If he loses these sales, the pro-
ducer is in trouble.
An even greater potential hazard comes from the tape-happy media director
who doesn't buy even the first print. A person from our company saw this hap-
pen in the office of an uuselfconscious media director in Northern California
last spring. The director, who had on his de.'Jk a number of audio tapes sent
in for a demonstration project from various producers, was calling across it
partition to an assistant, conferring on the number of tapes of each title they
thought they should run off on their high speed duplicator. These were not
Itoim films, but they might have been.
An ingenious way to save the taxpayer's money, by George ! Next year
perhaps they can set up a plant and print all their own textbooks by
facsimile.
Even if this last imaginative kind of larceny doesn't become the rage in
film duplication, the goose will succumb if there is loss of duplicate print orders
and replacement sales. Conservatively these will account for 259o of a com-
pany's sales. And there isn't a film producer in the country, whether it's EBE
or little old us, who wouldn't be out of business before you could say "video-
tape-duplication" if its gross income dropped by 25%.
No duqMcation without compensation ! Don't kill poor old granny goose! That's
the word. Pass it on.
Audiovisual Management
"unauthorized copying :" a bubbling issue
Historically, most schoolmen thought it acceptable to make a single
copy of a commercially produced educational program or of printed
materials. Much happened in the past year to dispel that notion.
First, a U.S. court of claims commissioner awarded damages to
a Baltimore publisher when a government-related medical library
made photocopies of a number of articles from the publisher's journals.
Next, the Educational Materials Producers Council, a group of companies
that publish programs in various A-V formats, formed a copyright
committee to push for revisions in existing copyright laws — revisions
which Congress seems closer to passing than at any time in the past
five years. Finally, news arrived that Utah's Granite School District
had reached a unique licensing agreement on film duplication with
Encyclopaedia P.ritanaica Educational Corp.
In f)rder to clarify the new copyright i.ssues. Nation's Schools con-
ducted the following exclusive interview with Ivan Bender, general
counsel of En('ycloi)aedia Britannica Educational Corp. and a member
of EMPC's Copyright Committee. — Philip Lewis, president, Instruc-
tional Dynamics, Inc., Chicago.
Jtfr. Bender, ire hear a Inf these dai/s ahnut sn-ealled ")inavfhori~ed eopyinfi"'
of films, filmstrips, videotapes, cassettes and other audiovisual programs. Can
yon give vs an example of a school district iritJi an "avthorized" copying policy?
Yes. The Granite School District, in suburban Salt Lake City, has requested
software producers to grant licenses to reproduce 16mm films in a videotape
format. The district has 1.'6 video cassette players and 21 player/recorders.
Encyclopaedia Britannica Educational Corp. has proposed an experimental one-
year rontract (beginning Feb. 1) under which the district can copy, in unlimited
fashion, any EBEC films they own or have leased — or may acquire during the
term of the contract. The offer is based on a licensing fee of $56 per unit of
equipment, or a total of $9,S00 for the year.
■ .d ..in
329
This type of proposal lets Granite account only for the number of machines in
use rather than keep track of student population, number of copies made, or
other factors that could mean a lot of bookkeeping for schools. In essence, the
Granite contract was negotiated on only two factors :
1) approximate number of films in use, and 2) units of equipment. If this
arrangement proves successful, it will no doubt lead to similar licenses.
Is this kind of licensing likely to become a trend? Do you visualize similar
agreements involving other kinds of media, such as audio cassettes or filmstrips?
The logic of the plan could extend to other kinds of media — provided that a
workable formula could be arranged. If the Granite arrangement proves suc-
cessful, I'd certainly say that's a distinct possibility.
What has prompted producers of audiovisual programs for education to he
concerned over unauthorized duplicating noic?
Principally, the improvement of copying hardware. Several years ago, photo-
copying reached a point of perfection; but only in the past year or so have
duplication techniques been refined for such equipment as the videotape player/
recorder.
In addition, the so-called "educational exemption" theory — a widespread
feeling in the educational community that certain types of copying for clas.'-jroom
use are permissible as long as this copying is not on a for-profit basis — has been
growing. The copyright law does not provide for such an "'educatioual exemiition."
and I'm sure you can see what the problems of such an exemption might be.
Can you spell out the problems?
I'm principally concerned about widespread copying, even if it's on a sporadic
or occasional basis. Producers aren't opposed to having their materials copied,
but they cannot accept the notion that their materials should be copied in a fashion
which would exceed the doctrine of "fair use" unless they receive just and fair
compensation.
For producers of audiovisual materials this is a very crucial problem. The
copying of even a few films by a school district could mean a severe economic
loss to them because unlike texts, which are generally bought for each student
in a class, A-V programs usually serve a number of students at any one time.
Using numbers, a textbook may sell from 10,000 to 100,000 copies, while an A-V
program's sales may not even reach 1,000.
Congress is at work on a new, revised copyright law. How does the existing
lato define ''fair use," and tvhat will the new law say about it?
Present copyright laws date back to 1909. The "fair use" doctrine has resulted
from judicial interpretations over the years. Basically, it allows limited copy-
ing of small portions of a work without seeking prior permission — and without
payment of a fee. For the first time, however, the proposed revision will make
"fair use" a part of the law itself. A recent House committee report stated :
"Where the unauthorized copying displaces what realistically might have been
a sale, no matter how minor the amount of money involved, the interests of the
copyright owner need protection." Some factors the user must consider: 1) the
purpose and character of the use ; 2) the nature of the copyrighted work ; 3) the
amount of material being copied as related to the work as a whole; and 4) the
effect of the copying upon the potential market for the copyrighted work.
From these guidelines, it seems the proposed lair will be asking schools them-
selves to make decisions as to what constitutes ''fair use." Can you provide
more specific rules- of -thumb?
First, let me say that it's easier to distinguish "fair use'' in printed materials
than in audiovisual materials. Take a motion picture film, for example. If you
use only a quantitative test to determine "fair use," you may well be in a situa-
tion that is legally unacceptable because of the very nature of the copyT-ighted
work. Copying one minute out of a film that nms for 20 minutes may not seem
to be a violation, but that one minute may be the most expensive and important
part of the film — especially if it depicts an event that was extremely difficult
to photograph or relates to special kinds of photography.
In the case of film-strips, however, it's my own feeling that copying one or
two frames out of a 50 or 60-frame filmstrip may more easily be interpreted ns
"fair use." This is not a uniform guideline, though, and the user would still
have to consider what these frames represent in terms of the work as a whole.
Can copying an entire program ever be defined as "fair use?"
No. This would apply even to print materials because of a recent case involv-
ing library photocopying of articles within periodicals.^ If there's any doubt
school officials should contact the firm.
1 Williams & Wilkins Co. v. The United States. Decided by U.S. Court of Claims, Feb. 16,
1972.
57-786— 76— pt. 1 22
330
Does it matter whether districts make single or multiple copies?
Not really. Even single copying of certain kinds of material may violate the
"fair use" concept. And multiple copying may subject the violator to a greater
amount of damages.
We understand that the Education Materials Producers Council has formed
a copyright committee to seek changes in the copyright laic. What other orga-
nizations are active in this area?
The National P^ducation Association has an ad hoe committee on copyrights
that sepks a limited educational exemption for the doctrine of "fair use." Basi-
cally, NBA would allow greater latitude in classroom copying than is presently
permissible.
Another group, the American Library Association, wants libraries to have
freer rights to copy single articles for research purposes and to have the right
to supply a copy of an entire work if the library has determined that copy-
righted work cannot be obtained from trade sources.
Why are we struggling so hard with the copyright laws when nobody thought
about them much for 50 years or so?
For the first few decades of this century, we weren't faced with the copying
technology that now exists. We now recognize that there are social values to
be considered on both sides of the issue. The new copyright law will allow us
to reach compromises .so that there will be accessibility to educational mate-
rials at the same time that tlie commercial procedures of these materials are
justly compensated for their creative efforts.
May I add that the new law envisions establishment of a commission on
technological developments that will assess the effects technical developments
will have on the copyright laws. The job of this commission will be to point out
and inadequacies in the new laws to the President and to Congress.
Regardless of what happens to the i-criscd copyright legislation, can ire as-
sume that educational mateHals producers will seek netv arrangements with
schools? If so, what are some alternative plans?
I think we can assume that the new te<'hnology will eventually result in some
modification of present marketing procedures. We will see more frequent blanket
licenses like the Granite arrangement. Or there may be a modification in price
structures that will allow a built-in royalty to the copyright proprietor when
he sells materials with the right to copy without permis.sion.
So-called compulsory licensing agreements, such as that practiced by ASCAP
(music publishers), might be pos.sible: but under present antitrust laws, this
would be very diflUcult to apply to any other industry. The ASCAP arrange-
ment operates under a special government ruling which permits its existence.
7s it possible that educational program producers could come up with a double
price structure— one price for normal use, and a higher price for unlimited
copying privileges?
This might well happen, although I think its premature. Quite naturally,
it will be up to individual companies to determine the kind of marketing tech-
niques that are most suitable.
TESTIMONY OF EDWARD J. MEELL, CHAIRMAN, EDUCATIONAL
MEDIA PRODUCERS COUNCIL
Mr. Meell. Thank yon, Mr. Cliairman.
My name is Edward J. Meell, chairman of the Educational Media
Producers Council of the National Audio- Visual iVssociation, With me
is the copyrisfht chairman of that council.
I would like, before I get into my formal summary of our statement,
to stress the first word in the title of our organization — Educational
Media Producers Council. The 95 members of that organization pro-
duce almost exclusively for the educational market.
We are not interested in the general consumer market, or the enter-
tainment market. We are producing for elementary, secondary, college,
and university schools.
I would like to stress that 90 percent of our organization's members
gross less than $5 million a year as a revenue under which thev operate.
That has to cover all sorts of things from marketing to development.
331
On behalf of my organization, I would like to say we support H.R.
2223 as it has been introduced, especially section 107, which writes into
statutory law the main principles of fair use as that doctrine has been
interpreted by the courts over the years. We would hope that fair use
does not become free use.
We feel the language, especially in 107, represents an equitable com-
promise between the creators and users of copyrighted educational ma-
terial, a compromise that has been painstakingly negotiated over the
last several years. The technology which permits the easy duplication
of audiovisual materials has been introduced only very recently — I
am thinking here of motion pictures, sound filmstrips, and audio
tapes — after hearings that your committee held in the sixties. It is a
very significant development for our industry, one which has already
had a great impact on the educational media industry, which merits
careful consideration by your committee.
As a point of fact, our industry is very pleased with the progress in
technologj^ It is not our intent to stop that march of progress of tech-
nolo^. It promises to make ideas and information more accessible to
scholars, teachei-s, and learners. These developments promise also to
expand the role and contribution of educational media producers to the
educational process, which w^e consider an integral part.
In order to maintain increasing incentives for the creation and pro-
duction of quality materials, we must not diminsh the statutory pro-
duction for intellectual products to which any author, creator, or artist
is entitled. We are therefore opposed to any amendment which would
provide for an educational exemption. We solely distribute, as I men-
tioned, to the educational market, not to the consumer or the en-
tertainment field.
An amendment wdiich increases the amount of duplication permit-
ted under fair use could significantly decrease potential sales, and
therefore the production of instructional materials. Companies in this
limited market are faced with two major factors.
First: The vast majority of audiovisual materials are not used in a
one-to-one situation. They are used with large and small groups. There-
fore, the number of copies made is quite limited — one or two copies of a
16 millimeter film may serve an entire school system of moderate size.
A single copy of a filmstrip or a sound recording will serve an entire
school.
Second : A typical audiovisual product will customarily sell rela-
tively few copies over a period of 5 to 10 years. This is in comparison
to textbooks or to journals which may sell thousands of copies. Six-
teen-millimeter films may sell only 500 copies over 5 years. If we lose
50 or 60 of those copies in unauthorized duplication, we are immeas-
urably hurt.
Thus, the recapture of initial investment in research, development,
editorial, and production work, which costs as much for one copy as for
many, is spread over the sale of a relatively limited number of copies.
In addition to the substantial initial investment required for these ma-
terials, there must be added operating expenses for the period of time
over which sales are made.
The combination of these factors — limited niarket, small volume
and sales over an extended period — means a specific broadening of the
fair-use criteria could damage beyond repair the quality and diversity
332
of the material available for our students and teachers. We are par-
ticularly pleased to note that the principal professional organization of
media educators, the Association for Educational Communication and
Technology, is also supporting the language of 107, as it now stands.
For our part, we recognize the industr^-'s responsil^ilitv to help edu-
cators utilize new technology as effectively as possible to improve the
instructional process. We have made studies and developed a series
of licensing arrangements over the past 2 years in cooperation with
individual school systems. These accommodations allow schools for the
first time to duplicate copies of purchased materials under agreed-
upon formulas of compensation and provide access to needed materials.
We also have made a very strong and successful effort to establish
and maintain dialogs with the users of educational media. This has
taken several forms, with dozens of discussions with users of these ma-
terials, approximately a dozen articles in educational journals, reprints
which have been made available free to educators, and individual
efforts of members of our copyright committee to assist school systems
to adopt viable copyright policies.
We are always ready to discuss with educational organizations
guidelines to aid in determining parameters of fair use. The bill, as
introduced, is good and workable, in our opinion, the product of many
days of deliberation by the respective congressional committees and
concerned parties. It is universally recognized that revision of the 100^
statute is imperative. The sooner this is accomplished, the better it will
be for all concerned.
We appreciate this opportunity to appear before you.
I would like to close by summarizing our small industry. The gross
dollar revenue per member company is small. Our unit sales are small.
Anything that would take away from these sales would, in fact, hurt
our industry and member companies. We do not want to stop tech-
nology. We want to accommodate technology and educators. We feel
we have gone as far as we can go. That is why we support H.R. 2223,
particularly section 107 as it stands.
Mr, Kastenmeier. Thank you, Mr. IMeell. We will now hear from
Mr. Zurkowski.
[The prepared statements of Paul Zurkowski follow :]
Statement of Paul G. Zurkowski, President, Information Inditstry
Association
Mr. Chairman. I am Paul G. Zurkowski, President of the Information Industry
Association, 4720 Montgomery Lane, Betliesda, Md. 20014. As you l^now, tlie infor-
mation industry has grown up in tlie years since 1967. The Association was formed
in 1968. As an attorney with some publisliing experience, I have served since
February 1969 as its first principal paid employee. Prior to that time, of course.
I served as legislative assistant in your office for approximatel.v five years.
The Association presented testimony to the Senate Committee on these same
issues in 1973. I refer you to that testimony for a detailed explanation of the
industry. It begins at p. 266 in the ,Tuly 31, Aug. 1, 1973 Hearings on S1361.
In her testimony last week the Register of Copyrights expressed grave con-
cern about information technologies. She said that because of today's technologies
once an author's idea is "out of the cage"', he has no way to recapture it. Pie
cannot receive compensation ; he cannot control the context, in fact, he has lost
his idea. She said that many authors are trying to determine if it is possible not
to let their ideas out preferring to keep them to themselves.
In the absence of effective copyright rules for modern information technologies
it is possible to devise methods to limit distribution and to limit access to au-
333
tlior's ideas and concepts to the elite wlio can afford it and who will agree to
protect it.
The objective of copyright is just the opposite, to encoiirage the author to
permit tlie wide dissemination of his ideas in return for an exclusive right in the
form in which they are expressed.
This is the objective of the information industry as well — to obtain the widest
possible dissemination of information, fully utilizing all available information
technologies while protecting the rights of authors. This is the industry's central
function.
The business of information is a competitive and self-disciplining business.
People in the business of information recognize that the materials in which they
deal embody human creativity. They recognize that they must deal with it ethi-
cally. In addition, from a business standpoint they do not seek for themselves
rights in the property of others which they would not be willing to grant to others
in their property.
In anticipation of these Hearings, the information industry two years ago,
xmdertook a study of the Revision Bill and the practices that have grown up in
industry in dealing with the problems of new technologies.
As in traditional publishing areas the trade practices of the industry are built
on the rights granted authors by the Constitution. Wide-spread industry prac-
tices were analyzed and recommendations were tleveloped by which the prac-
tices that have grown up could be incorporated in the Copyright Revision Bill.
Specific language changes were prepared which we submit to you. We choose today
to synopsize them so that you will have the benefit of the industry's thinking while
you evaluate the major change proposed by the educators.
We urge the Committee to add the issues relating to new technologies to the
list of issues prepared by Ms. Ringer and to hold hearings on these issues. Ms.
Ringer cited ''present need for a revised law that will anticipate the 21st Cen-
tury". Much of what relates to new technologies can be dealt with in the context
■of the present Revision Bill. The work of the National Commission on New
Technological Uses of Copyrighted Works can be greatly aided by this Com-
mittee's serious analysis of the issues to determine what can be resolved now
and what needs to be deferred for further study by that Commission.
Before addressing the education amendment the following amendments have
been developed by our committee and are offered as detailed suggestions for
( xteiuling copyright protection to works of authorship in the new information
technologies.
Proposed amendments to § 101. Definitions :
Add the following :
A "data bap<e" is a literary work which is a compilation expressed in a
form intrinsically intended for use in conjunction with a computer.
A "search" of a data base is the examination or analysis of a data base by
a computer for particular information relevant to an inquiry, whether or
not the examination or analysis results in any display, copy or performance
of all or part of the data base, and whether or not the inquirer received it
in the same place otr in separate places or at the same or at different times.
A "computer program" is a literary work consisting of a series of instruc-
tions of statements which are in a form acceptable to a computer and which
are prepared in order to achieve a certain result, d-egardless of the nature of
the material objects, such as documents, punched cards, magnetic tapes or
discs, or computer storage elements, in which the works are embodied. A
computer program may be a derivative work of a flow chai't and either may
be a derivative work of a literary work.
A "computer" is any automatic system capable of storing, processing, re-
trieving or transferring information, oi* any similar device, machine or
process.
A "microform composition'' is a literary work that results from the fixa-
tion of a series of images regardless of the nature of the material objects,
such as fiche, film, opaque or otherwise in which they are embodied.
"Direct or indirect commercial advantage" includes, but is not limited to
sale of products or services regardless of the tax status or organizational
nature of the vendor, or method of payment be it on a per unit, membership
fee or otherwise.
An amendment in the nature of a technical amendment is also offered with
regard to the definition for "a work is fixed." To wit :
A work is "fixed" in a tangible medium of expression when its embodiment
in a copy or phonorecord. by or under the authority of the author, is non-
334
evanescent and sufficiently permanent or stable to permit it repeatedly to be
perceived, reproduced, or otherwise communicated. A work consisting of
sounds, images, or both, that are being transmitted, is "fixed"' for purposes
of this title if a fixation of the work is being made simultaneously with its
transmission.
EXPLANATORY LANGUAGE
Because there has been some comment in the literature that the copying of a
copyrighted work into the main storage element of a computer might not be an
infringement, and because the recorded state of a copyrighted program in main
memory (and some other computer storage elements) might only obtain for n
few microseconds, it is thought desirable to amend the definition for "a work is
fixed". As presently written it is believed that the definition intends, among other
things, for an immediately self-decaying embodiment not to be a fixation. Storage
in main memory is not self decaying in a whole element sense though the re-
cordingsi in the components of some computer storage elements are automatically
refreshed internally. Storage in main memory is normally erased or replaced on
specific instruction only. Such recordation in main memory is, thus, non-
evanescent and sufficiently permanent or stable to permit it repeatedly to be
perceived, reproduced or otherwise communicated. Thus, the definition for "a
Avork is fixed" would be more suitaltle and accurate if amended. It is believed
such amendment does not change the basic intent of the definition while making
clear that recordation in the main storage element of a computer would be the
making of a copy.
Proposed amendments to § 102. Subject matter of copyright : In general,
Add the following as separate categories of works of authorship :
"(8) Databases.
^'(9) Computer Programs.
"(10) Microform compositions."
EXPLANATORY LANGUAGE
Consistent with the first complete paragraph on page 107 of Senate Report
No. 93-983, it is noted in connection with the inclusion of "data bases" and
"microform composition" that they may, though not always, involve "author-
ship" both on the part of those whose ideas and concepts are captured and on
the part of the data base and microform composition producers responsible for
conceptualizing the data base or microform composition, capturing and proc-
essing the data or images, and compiling and editing them to make the final
product. There may be cases where the producer's contribution is so minimal that
the ideas and concepts embodied in the data base or microform composition are
the only copyrightable element in the work and there may be cases (for example,
public domain materials) where only the data base or microform composition
producer's contribution is copyrightable.
With regard to data bases and microform composition, it is not the intention
of this amendment to preclude others from reconstituting the original source
materials and ideas into their own independent woyk. but rather to assure that
society has the choice of choosing from amongst a variety of data bases and
microform compositions already in being and available readily in the market-
place by virtue of the operation and application of copyright concepts to these
intellectual properties.
It is proposed that 102 (b) also be amended, by adding the following :
"However, copyright protection may exist in a collection of ideas or abstrac-
tions arbitrarily selected from a plurality of alternative ideas or abstractions or
in a discretionary pattern of events or processes."
EXPLANATORY LANGUAGE
This amendment is directed at the copyrightability of computer software.
Computer programming is a very flexible art. Given a single problem and a basic
plan for its solution, two independent programmers could, and likely would,
write two different computer programs.
Thus the proposed amendment would ensure that the computer program de-
veloper will have copyright protection in the discretionary elements of his se-
quence of operations and particular processes. Typically, the sequence of
operations and*particular processes are set forth on a flow chart. A program, as
a derivative work of a flow chart, would be protected in that aspect of the
developer's creativity effort, too.
335
Considerable effort is spent in working out the sequence of events or steps
(operations) tliat a program will folluw and in selecting the processes to carry
out the various individual steps. It is believed that this effort involves the
elements of assembly, selecting, arranging, editing, and literary expression, and
thus is the work of an author. Section 102(b) appears to be included in the bill
to ensure that the copyrighting of programs does not result in the equivalent of
patenting its system concepts. As written. Section 102(b) goes further than neces-
sary. Even the Supreme Court in the case of Baker v. Selden, 101 U.S. 99, 26
Lawyers Ed 841 (1879) did not go that far. Thus, that decision reads :
"And where the art it teaches cannot be used wdthout employing the methods
and diagrams used to illustrate the book, or such as are similar to them, such
methods and diagrams are to be considered as necessary incidents to the art, and
given therewith the public ; not given for purposes of publication in other works
explanatory of the art, but for the purpose of practical application."
Therefore, the holding in Baker v. Selden is limited to situations where alter-
native processes and sequences are not available. Where such are available, it
would seem that the Copyright Law should apply and the program developer pro-
tected against copying of the discretionary elements of his particular develop-
ment. Others would still be free to use the methods of operation dictated by the
results to be accomplished and to flesh out their own versions of how to achieve
those results.
It is proposed that § 106, Exclusive Rights in Copyrighted Works be amended
as follows :
"(5) in the case of literary, mu.sical, dramatic and choreographic works,
pantomimes, and pictorial, graphic, or sculptural works, including the individual
images of a motion picture or other audiovisual work, data bases and com-
puter programs, to display the copyrighted work publicly."
and add the following :
" (6) to read, to store or to reproduce far storage in a computer ;
" (7) to search or use a data base in conjunction with a computer."
It is also proposed that Section 117 : scope of exclusive rights : Use in con-
junction with computers and similar information systems, he deleted.
A concomitant proposed amendment to the amendments to Section 106 is the
deletion of Section 117. By specifically addressing the reading into, storage or
reproduction for storage in a computer as an exclusive right of the owner of
copyright under this title, this language would explicitly resolve a major question
left open by the language of Section 117 in favor of the producer of the copy-
righted work. Provision of the search and use rights assures the proprietor of a
data base copyright with his basic rights and completes resolution of the main
question concerning use of copyrighted works in computers. The word search
is included among the proposed amendments to the definitions section of the bill.
The output of a search of a data base would be protectible as a derivative work.
A new Section is proposed : § 11_. Scope of exclusive rights in computer
programs :
NEW section 11. — Scope of exclusive rights : Computer Programs.
"In the case of computer programs, notwithstanding the provisions of sub-
sections (a) and (b) of Section 109, it is an infringement of copyright for the
possessor of a computer program to make a copy thereof by repl'oducing it in a
computer unless authorized by the copyright owner.
"The copyright status of the result of the execution of a program will be that
of a derivative work of the information (which may be a program) processed or
modified by the executing program and its ancillary programs."
Explanatory language :
Tills amendment is necessary if the marketing of programs is to be facilitated by
sale and not limited to lease/license arrangements. The amendment would en-
sure that the repurchaser, or the like, of a machine- readable media copy of a
program is not automatically entitled to reproduce the program in his computer.
It may be that the first purchaser of a program would have an implied right to
reproduce it in his computer. However, if this is an inalienable right of a suc-
ceeding holder of a machine-readable media embodying a program, then it may
be that the market for the program author is exceedingly limited. This would
come about because the first purchaser of a program could read it into his com-
puter, and once having entered it into permanent storage therein, could pass the
machine- readable media on to a second computer owner. In this way, the
theoretical market for a ptrogram might basically be reduced to one. This would
not facilitate cost recovery on the part of the author and would undoubtedly
stifle development activity. This amendment would also make clear that it is ci
336
copyright infringement where a person borrows a computer storage element (disc
machine) containing a progl'am from a friend and transfers the program to
another host machine without permission of the copyright owner.
A new Section is proposed : § 11 — : Scope of exclusive rights : Microform
Compositions.
NEW Section 11 — . Scope of exclusive rights: Microform Compositions.
"(a) Limitations on Exclusive Rights. The exclusive rights of the owner of a
copyright in a microform composition are limited to the rights specified in clauses
(1), (3) and (5) of section 106. The exclusive rights of the owner of copyright
in a microform composition to reproduce and display it are limited to the rights
to duplicate th? microform composition in the form of the microfiche, microfilm,
opaques or other microforms that directly or indirectly recapture the actual
images in the composition, and to display these actual images. These rights do
not extend to the making or duplication of another microform composition that
is a fixation of other images, or to the display of other images even though
such images derive from the same or similar subject matter to those included in
the copyrighted microform composition.
"(b) Right of copy distinct; the exclusive right to copy or to display copy-
righted literary or dramaMc work, and the right to copy or display a copyrighted
microform composition are separate and independent rights under this title."
Explanatory language :
This section is modeled after the language of the tape piracy statute and calls
for a recognition of two separate rights.
The intent of this amendment is to create what has been a format copyright
in the work of a creator of a microform composition. There are variations in the
nature of the contribution different creators will bring to the creation of a micro-
form composition. A simple reproduction of a pre-existing document might not
qualify for copyright as a microform composition. The collection, selection, orga-
nization, editing and creating of a large set of materials represents a major
contribution of the nature copyright protection was intended. This amendment
would provide such protection. It should be noted, however, that the protection
provided is limited to the specific composition created and does not preclude any-
one else, with independent effort and creativity from microfilming those same
materials and, perliaps, qualifying for a separate copyright for his efforts.
By way of a technical amendment to § 301. Pre-emption with respect to other
laws, the following amendment is proposed :
"§ 301. Pi-e-emption with i*espect to other laws.
"Ca) On and after .Tannary 1, 1977. all legal or equitable rights that are equiva-
lent to any of the exclusive rights within the general scope of copyright as speci-
fied by section 106 in works of authorship that are fixed in a tangil^le medium
of expression and come within the subject matter of copyriglit as specified by sec-
tions 102 and 103. whether created before or after that date and whether pub-
lished or unpublished, are governed exclusively by this title. Thereafter, no per-
son is entitled to any such right or equivalent right in any sucli work under the
common law or statutes of any State.
"(b) Nothing in this title annuls or limits any rights or remedies under the
common law or statutes of any State with respect to :
"(1) subject matter that does not come within the subject matter of copyright
as specified by Sections 102 and 103, including works of authorship not fixed in
any tangible medium of expression ; or
"(2) any cause of action arising from undertakings commenced before Janu-
ary 1. 1977; or
"(3) activities violating legal or equitable rights that are not equivalent to
any of the exclusive rights within the general scope of copyright as specified by
section 106, including rights against misappropriation not equivalent to any of
such exclusive rights, breaches of contract, breaches of trust, trespass, conversion,
invasion of privacy, defamation, and deceptive trade practices such as passing
off and false representation.
"(c) Nothing in this title annuls or limits any rights or remedies under any
other Federal Statute.
"(d) Compliance with the deposit requirements of this title shall not be de-
structive of any such "not equivalent" rights."
An amendment to Section 407. Deposit copies of phonorecords for Library
of Congress is offered as follows :
"(b) The required copies or phonorecords shall be deposited in the Copyright
Office for the purpose of reference within the Library of Congress. The Register
337
of Copyrights shall, when requested by the depositor and upon payment of the
fee prescribed by section 70S, issue a receipt for the deposit."
Subsection (b) is amended to limit the use that might be made by the Library
of Congress of deposited works. Items such as data bases, computer programs and
microform compositions are costly and the use thereof for purposes other tlian
reference within the Library of Congress would substantially impact the oppor-
tunities for authors to recover their costs, particularly considering the limited
quantities in which they are marketed.
An amendment to Section 40s. Copyright Registration in General is offered as
f oUows :
Add a new section (f ) :
"(f) In the case of microform compositions deposit copies are required only
where the retail price of the composition is $1,000 or less. In cases where micro-
form compositions are created in editions, deposit copies are required only when
the total number of copies in a particular edition exceeds 200 in number."
The creation of a microfilm composition often is an expensive process and
results in very small unit sales. Many microform compositions sell only 20 or oO
copies and a total sale of 50 is usually considered quite a successful work. To
require the creator of a microform composition to deposit two copies out of per-
haps a total of 20, represents a disproportionate burden. The manufarture
of each copy, in addition, is a costly effort. The purpose of this amendment is to
limit the impact of the deposit requirement on the overall objective of the Cijpy-
right system : to obtain the widest possible dissemination of information useful
to science and the useful arts.
An amendment to 704, Retention and Disposition of articles of deposit in Copy-
right Office is proposed as follows :
"(a) Upon their deposit in the Copyright Office under sections 407 and 408,
all copies, phonorecords, and identif.ving material, including those deposited in
connection with claims that have been refused registration, are in the custody
of the United States Government."
Subsection (a) would be amended to specify that deposit copies are in the
custody of, rather than the property of, the United States Government. Title
would thus be left in the author and the Library of Congress' rights of utiliza-
tion and disposition limited to that of a bailee. Again the intention, in the light
of vastly expanded library networking concepts, is to limit the use that may be
made of expensive deposit copies by others than the Library of Congress. A
replication and redistribution effort by the Library of Congress could severely
affect the rights of authors otherwise granted in this legislation.
We be'ieve tlie.se amendments deserve consideration in this revision cycle. They
represent the results of day-to-day experience of authors, information companies,
and users seeking to work out within existing copyright concepts workable rela-
tions for the dissemination of information through these technologies. We ret^nsi-
nize the great pressure on the Committee to act on this legislation, particularly
in view of the immense effort you have already devoted to it. These are no
small matters, however : the present and future methods for sharing the works of
authors with world-wide audiences are to be found in this complex mix of con-
stitutional, economic and social issues.
Whether you are able to take the time to understand these new technology
issues now and to act on those which deserve immediate attention or are con-
strained to defer to the National Commission on New Technological T'se« of
Copyrighted Works on all of them, it should be clear that the constitutional
rights of authors will not be protected by exemptions that essentially free large
computer systems to have free access to all works of authorship.
One of the major features of the computer age is the fact that state after state
has created large university-based computer facilities and have given these
facilities extensive authority to serve not only educational users, students, but
industry, libraries of all kinds and government, state and fedei-al. as well.
The result of granting such facilities an exemption to input into computers
copyrighted works of authorship without infringing the copyright would be the
creation of a whole new information distribution system in the United States. The
svstem would not be based on author's rights as the present system is based.
Rather it would be based on state bureaucratic decisions. Only those authors
which the state-owned networks chose to respect would be granted anything
approaching the rights of authors enjoyer in inkprint publications. The works of
authors could be freely installed in computers without the authors' approval or
even knowledge. The authors ideas could lie used, re-documented and even dis-
torted as to source, meaning and context. One area served by one system would
338
have access to that systems version of the facts and another area would have
Jiocess to another state-subsidized version. How would we as a nation sort out
the truth without equal access to the same unabridged works of authorship. If
the author's control over his work pro<luct through copyright is denied him by
exemptions which free his works to be input, piecemeal or in total, accurately or
inaccurately, it is difficult to see how the nation can stimulate and reward authors
for writing the insightful and critical commentaries essential to the functioning
of a democracy.
An exemption of input from copyright infringement would have other effects
as well :
By implication such an amendment to the present legislation acknowledges
that to input copyrighted materials into a computer is an infringement under
present law. A need for such a change in the law has not been proved.
The small printouts resulting from most computer searches would by their
size alone be argued to constitute "fair use" of the information. Having inserted
ill the computer the Encyclopaedia Britannica, brief extracts would be printed
-out. Notwithstanding the fact that this is the only way to use encyclopedic infor-
mation, many would seek to treat it as fair use. Since there is no provision for
any payment system in the proposal, this apparently is the intended result.
If entire works are free to be input, such materials as the Reader's Guide to
Periodical Literature could be keypunched and installed in a computer system.
Such publications are used simply to find a specific article citation. Without
specific provision for controlling uses, the protection offered by copyright would
be minimal. Little would be published in the open literature and authors would
attempt to protect themselves by limiting by contract what uses could be made
of tlieir works.
The stress on exemptions would have the effect of eliminating publishing
media which did not have exemptions because the basis for creation and invest-
ment in dissemination efforts, a minimal proprietary position, would be elimi-
nated. The result would be reduced creation and distribution of works of author-
ship. The elimination of risk capital and the reliance on state capital would seri-
ously retard development in many areas of science and the useful arts.
The proliferation of non-profit uses, particularly in information, today are
legend. Government funding of research in information systems work, for ex-
ample, is essentially limited to grants to non-profit organizations. This has led to
the development of a whole generation of organizations performing this re-
search on a non-profit basis. Separate non-profit groups have grown up to do simi-
lar research in education. We raise these questions not to challenge the purposes
of these groups, but to suggest that the amendment is unduly broad as drafted and
would serve, if enacted, to stimulate even further the development of subsidy-
based information dissemination activities.
Finally, we believe there are several basic legislative drafting objections to
the exemption proposal :
The amendment conflicts with the purpose of Section 117 to maintain the
status quo in the law vis-a-vis copyright at input. If the committee is to con-
sider seriously this exemption, similar serious consideration must be given to the
author's-rights-based amendments offered above. It should be clear from a brief
reading of the amendments we have suggested that this is an exceedingly com-
plex area and that it cannot be dealt with simplistically.
The amendment, if coupled with the library photocopying exemption, appears
to destroy the economic base of publishing. What the education exemption would
allow to be input without infringing copyright, the library exemption would per-
mit the copying of. The result would be the elimination of meaningful copyright
protection for authors.
The amendment would preempt much of the work of the National Commis-
sion on New Technological Uses of Copyrighted Works. By granting such an ex-
emption, the amendment would not only prejudge a large segment of the Com-
mission's responsibilities, but it would also create a situation where there would
be no experience for the Commission to draw on in evaluating how authors and
users can resolve problems and develop workable relations within an economic
framework.
In summary, the information industry position on H.R. 2223 is that, subject
to some technical amendments, the bill should be enacted in its present form and
that the library and education exemptions should be rejected. In the event that
serious consideration is given to any such amendments, of a nature to deprive
authors of significant rights in the new information technologies, we respectfully
339
Tequest that the recommendations of our committee be given full and equal con-
sideration including the calling of witnesses with first-hand experience in the
day-to-day resolution of the problems encountered. While many of these issues
should be referred to the National Commission, some questions could be resolved
now on the basis of existing knowledge, expertise and understanding. We, accord-
ingly, urge the Committee to hold hearings with regard to developments in the
new technology area. It is in this area of the law that the copyright concept will
be most challenged in the montlis and years immediately ahead. An effective
copyright law, "that will anticii>ate the 21st Century" will need to deal with
thevSe issues.
We thank you for your courtesy in providing us this opportunity to share our
views with you and we wish you the best of good fortune in this and all other
areas requiring your legislative skills.
Statement of Paul G. Zurkowski, President, Information Industry
Association
Mr. Chairman and Members of the Committee. My name is Paul G. Zurkowski,
President of the Information Industry Association. I have prepared a formal
•statement which I will not read but which I ask be submitted for the record.
The Information Industry Association is composed of more than 70 commercial
firms. Some create data bases and computer programs. Others specialize in
marketing access to such machine readable information sources. Others are micro-
form publishers, traditional liook and journal publishers, consultants, informa-
tion-on-demand companies, suppliers of services to libraries, indexing and
abstracting companies, information systems designers, information facilities
managers, and others engage in the creation and marketing of information
products, services and systems, world-wide.
Many of these companies have a decade or more of experience in disseminating
works of authorship through the use of all varieties of advanced information
technologies, alone and in combination with traditional ink-print technologies.
Our Proprietary Rights Committee spent the past two years matching this prac-
tical experience with the provisions of the revision bill. You will find in the
statement the results of that effort. We think that before your committee makes
or the National Commission on New Technological Uses of Copyrighted Works
recommends, any changes in H.R. 2223 affecting the use of works of aiithorship
in these new technologies these recommendations and the experience of this
industry should be considered. I'eople in the industry dealing with the oppor-
tunities for wider dissemination of information offered by the new technologies
are ready and willing to assist you in these matters in any way they can.
The objective of copyright is to encoui'age the author to permit the wide dis-
semination of his ideas in return for an exclusive right in the form in which they
are expressed. This is the objective of tlie information industry as well — -to obtain
the widest possible dissemination of information, fully utilizing all available in-
formation technologies while protecting the rights of authors.
We appear to add our support for enactment of H.R. 2223 and to register our
opposition to the amendments proposed to sections 107 and 108.
We feel most strongly that a single-copy photocopying exemption combined
with an exemption permitting the input of copyrighted works of authorship into
a computerized information system would eliminate meaningful copyright for
authors. Copyrighted works of authorship which the education exemption would
permit to be input without infringing copyright could be copied on a single-copy
basis under the library exemption. Stripped of these copyright protections, au-
thors could publish little in the open literature without being subjected to such
exempt uses. Authors, in turn, would seek to protect their works, as the Register
fears and the Justice Department recommended, by limiting by contract what
uses could be made of tlieir works. The end result for both libraries and educators
would be less access rather than the free access they initially expect would result
from their amendments.
Further objections to the proposals Include :
1. No need for such an exemption has been proved. An industry is emerging
to provide the widest possible dissemination while respecting the constitutional
mandate to i>rotect author's riglils.
2. Small printouts from data lianks of encyclopedic information would be
argued to constitute "fair use", notwithstanding that this is precisely the use
intended. These kinds of resources would be denied to research, education and
340
libraries on an open copyrighted basis and would have to be provided under
contractual arrangements.
3. By exempting certain activities, and thereby exempting them from costs
others have to pay, these exempt activities would tend to replace privately
funded publishing and information activities. The elimination of private risk
capital from the creation and information distribution functions would seriously
retard development in many areas of science and the useful arts.
Finally, the proposal to exempt input conflicts with the provisions of section
117 to maintain the status quo in the law vis a vis questions of copyrighted worlvs
and computers. This is an exceedingly complex area involving not only author's
rights, but also major social policy questions with far-reaching economic impli-
cations. Section 117 was originally included in the bill in recognition that
neither this Committee nor the Senate Judiciary Committee has explored these
issues adequately. The National Commission on New Technological Uses of
Copyrighted Works was established to do that investigation for the Congress.
If these exemptions are written into the law the study expected of the Com-
mission would be seriously prejudiced. By granting exemptions at the expense
of author's rights and the economic interests of publishers and information
companies, the arena within M-hich all parties now are developing workable
relations would be destroyed. The Commission would be deprived of the neces-
sary experience in the marketplace on which to base meaningful recommenda-
tions for future copyright legislation.
CONCLUSION
"While our committee of people who work with these technologies day in and
day out were able after lengthy meetings and detailed discussions to agree
on some liasic definitions and on an approach to the technologies based on
author's rights, there also emerged unanimity that these were just the beginning
in understanding the whole complex of dynamic technical, esoteric, legal, social
and economic relationships which ultimately will form the base for our emerg-
ing information society.
It promises to be an exciting and long journey. We recognize as an industry
that the serious attention you are giving these matters represents for our society
that first step by which any journey must begin.
TESTIMONY OF PAUL G. ZURKOWSKI, PRESIDENT, INFORMATION
INDUSTRY ASSOCIATION
Mr. ZuRKOwsKT. I have submitted two statements. I will read part
of tJie four-page summary statement.
My name is Paul Zurkowski; I am president of the Information
Industry Association. Donald Johnston, counsel, Xerox education
group and member of our Pro):)rietary Riglits Committee is with me.
The association is composed of more than 70 commercial firms, all of
which are involved in one way or the other in applying the modern in-
infonnation technologies to the dissemination of information.
]\Ianv of these companies have a decade or more of experience in
disseminating works of authorship through the use of all varieties of
advanced information technologies, alone and in combination with
traditional ink-print technologies.
Our proprietary rights committee spent the past 2 years matching
this practical experience with the provisions of the revision bill. You
will find in the statement the results of that effort. We think that before
your committee makes, or the National Commission on New Tecl^nolo-
gical Uses of Copyrighted Works recommends, any changes in IT.E.
2223 affecting the use of works of authorship in these new technologies,
these recommendations and the experience of this industry should be
considered.
341
People in the industry dealing with the opportunities for wider dis-
semination of infonnation offered by the new technologies are ready
and willing to assist you in these matters in any way they can.
The objective of copyright is to encourage the author to permit the
wide dissemination of his ideas in return for an exclusive right in the
form in which they are expressed. This is the objective of the informa-
tion industry as well — ^to obtain the widest possible dissemination of
information, fully utilizing all available information technologies,
while protecting the rights of authors.
"\Ye appear to add our support for enactment of H.R. 2223 and to reg-
ister our opposition to the amendments T)roposed to sections 107 and
108.
We feel most strongly that a single copy photocopying exemption,
combined with an exemption permitting the input of copyrighted
works of authorship into a computerized information system would
eliminate meaningful copyright for authors. CopyrightedVorks of au-
tl^.orship which the education exemption would permit to be input
without infringing copyright could be copied on a single copy basis
under the libraiT exemption.
Stripped of these copyright protections, authors could publish little
ill the open literature without being subjected to such exempt uses.
Authors, in turn, would seek to protect their works, as the Register
feai-s and the Justice Department recommended, by limiting by con-
tract what uses could be made of their works.
The end result for both libraries and educators would be less access
rather than the free access they initially expect would result from
tlieir amendments. Further objections to the proposals include:
Small printouts from data banks of encyclopedic information would
be argued to constitute fair use, notwithstanding that this is precisely
tJie use intended. These kinds of resources would be denied to research,
education, and libraries on an open copyrighted basis, and would have
to )^e provided under contractual arrangements.
By exempting certain activities, and thereby exempting them from
costs others have to pay, these exempt activities would tend to replace
privately funded publishing and information activities. The elimina-
tion of private risk capital from the creation and information distribu-
tion functions would seriously retard development in many areas of
science and the useful arts.
Finally, the proposal to exempt input conflicts with the provisions of
section 117 to maintain the status quo in the law vis-a-vis questions of
copyrighted works and computers. This is an exceedingly complex area
involving not only authors' rights, but also, major social policy ques-
tions with far-reaching economic implications.
Section 117 was originally included in the bill in recognition that
neither this committee, nor the Senate Judiciary Committee, has ex-
])lored these issues adequately. The National Commission on New
Technological Uses of Copyrighted Works was established to do that
investigation for the Congress.
If these exemptions are written into the law, the study expected of
tlie commission would be seriously prejudiced. We think we are enter-
ing the information age. The work you are doing in this area is very
important to the system of freedom of expression this country enjoys.
We certainly appreciate the dedicated efforts you have given it.
Thank 3'ou very much.
342
Mr. Kastenmeier. Thank you very much, Mr. Zurkowski.
[The prepared statement of Ernest R. Farmer follows:]
Statement of Ernest R. Farmer on Behalf of the Music Publishers Asso-
ciation OF THE U.S., Inc., and the National Music Publishers' Association,
Inc.
Mr. Chairman, my name is Ernest R. Farmer, President of Shawnee Pre.ss, Inc.,
a miisic publisher located in Delaware Water Gap, Pa. I appear before this
Committee today on behalf of the Music Publishers Association of the U.S., Inc.,
the trade association of the publishers of educational, concert and saci-ed music,
of which I am a past president. I also appear on behalf of the National Music
Publishers' Association, Inc., the trade association of publishers of popular,,
motion picture and theater music. I might add that I am also past president
of the Music Industry Council, an auxiliary organization of the Music Educators
National Conference which creates a liaison between that organization of musie
teachers and various components of the music industry.
The provisions of Section 107 are of vital concern to those members of the music
publishing business who depend upon the sale of music in printed form as the
basis upon which their particular businesses depend. The graphic representation
of the creations of composers and authors — printed music — represents a sub-
stantial part of such businesses — in many cases almost all of it.
It may be helpful to an understanding of this function to linow that the prime
markets for printed music are schools and churches for use by their choruses
and bands and orchestras. In this sense we are "group music" specialists. For
this reason, the unit price of our publications is relatively modest and we look
to the purchase of multiple copies of a given publication to make it commercially
feasible.
As an illustration. I have here a single copy of one of our choral publications;
that is widely sung in our Nation's schools. The retail selling price is 35 cents.
You will note" that in a technical sense it is a relatively simple publication. Two
sheets of paper 101/2 by ISV2 inches in size, printed and folded together unbound.
Obviously, once the initial music engraving and typography has been done and
the initial copies printed, further reproduction by any one of a number of means
readily available in today's schools becomes a simple matter.
While I have used a choral publication as an example, the same situation
exists relative to band and orchestra works.
This simple matter of luiauthorized reproduction by schools or churches is
vitally important to our authors and composers and to us as publishers. Wide-
spread, unauthorized photoduplication of our music could sap the lifel)lood of
our business, deprive authors and composers of their royalties and publishers
of their basic source of income. Such a situation does indeed exist under the
current U.S. Copyright Law due to misconceptions and misunderstanding and
misinformation and in the absence of clear and workable guidelines.
Let me state categorically that my colleagues and I have the highest regard
for the music teachers of America. Moreover, the relationship between the music
publishers associations and the Music Educators National Conference whose
membership of over .50.000 includes most teachers of music in the schools of
America serves as a model of understanding and cooperation between educational
users of copyrighted materials and the authors, composers and publishers of
those works.
As a matter of fact, the Executive Board of the MENC in June of 1973 unani-
mously supported the following statement of policy :
I. MENC Policy on the Use of Copyrighted Material.
The MENC National Executive Board establishes as the policy of the Music
Educators National Conference that the copyright law shall be observed and'
that improper and unauthorized use of music and other printed materials pro-
tected under that law shall be prohibited in all conference activities. Further, all
MENC national and state affiliates are urged to adopt a similar position as official
policy.
II. Implementation of MENC Copyright Policy.
The MENC National Executive Board directs that official MENC policy on-
the use of copyrighted materials be implemented in the following ways :
(1) When a director accepts an invitation to appear on a convention program
he shall sign a declaration stating that he has read the MENC policy and will'
not use unauthorized copies of copyrighted materials.
343
(2) Any participants in an MENC program violating tliis policy position will
be subject to suspension from the program.
(3) The action of the National Executive Board shall be communicated as a
matter of general information to all participants in MENC-sponsored activities.
Moreover, a number of state organizations of music educators have under-
taken similar and in some cases stronger statements on behalf of respect for and
observance of copyright.
It is important to recognize that the term "teaching" as it relates to music
ultimately carries with it the implication of rendering, interpreting or perform-
ing. Although there are certain academic and theoretical aspects of the art that
do not require re-creation in the form of sound, the teaching of music as it is
generally imderstood in the schools requires the learning of skills necessary to
accurately convert abstract symbols printed on a piece of paper into a given
sound within a given time by means of instruments or the human voice.
Therefore, copies of printed music such as this are regularly used for the pur-
pose of teaching. In simple, realistic terms duplication of printed music for teachi
ing inevitably means reproduction of multiple copies with disastrous conse^
quences to authors and composers and their publishers.
We are in favor of and support Section 107 as it is set forth in H.R. 2223, but
in order that users of music interpret the Section correctly and equitably and
avoid inadvertent or intentional misinterpretation of the provisions of Section
107, we believe that repetition of the excellent explanation and interpretation
which was included in your predecessor's Subcommittee's Report (Report #2237,
89th Congress, 2d Session) is absolutely essential.
Let me suggest how Section 107 without the support of a comprehensive ex-
position in an accompanying report might be interpreted by our present custom-
ers. Imagine ourselves in the position of a public school music teacher any place
in the United States when confronted with the new guidelines. And let us
further assume that we are attracted to this particular piece of music and want
to teach our classes to sing it.
Subject to the criteria in the proposed wording of Section 107 alone, would it
not be reasonable to assume that to a person engaged in "teaching" it would be
perfectly proper to make whatever number of "copies" may be necessary to
"teach" our singers?
In determining the particulars of this example with respect to guideline (1)
in Section 107, the puri>ose and character of our hypothetical use is for "teach-
ing." And that is proposed to be recognized as a fair use.
As to the second guideline, what is the nature of the copyrighted work? Our
hypothetical teacher might well say, "Why, it's a simple little song and there
are thousands published every year. As a teacher, I just happen to like this one."
In dealing with the third criterion, I must point out that it is not unusual for
certain individual songs to be published in collected form. For instance, our pre-
vious example is also found as part of the contents of this choral collection which
I have here.
If the teacher chooses to reproduce his copies for the purpose of teaching
from this collection rather than the separate publication, would it not be rea-
sonable for him to assume that he has satisfied the third requirement : that in
selecting one song from 40 the "amount and substantiality of the portion used" is
relatively insignificant in relation to this choral collection. Yet in fact, our hypo-
thetical teacher has reproduced a complete work * * * words, music, melody,
harmony, and accompaniment essentially as they appear in the separate edition
previously shown.
As to the fourth guideline and "the effect of the use upon the potential markets
for or value of the copyrighted work," our teacher might well say, "Why I'm
just one teacher who wants to teach a nice song to some youngsters. How could
this possibly hurt anyone?"
Now I fully realize that such reasoning as we have outlined in our hypothetical
case might not stand up in a court of law. But why must the copyright owner Ite
put in the position of policing such an open-end statute in order to survive in
the major market available to him?
In the past the music publishers associations have undertaken to inform
music educators on copyright matters as indeed have the educator's national
organization's publication and statements of policy. We have confidence that
the Music Educators National Conference would join us in a massive under-
taking after the passage of a new Copyright Law to inform music educators
344
what they may and what they may not do under the Copyright Law through
circulation of the relevant portions of the Law and the Report.
On June 2, 1965 (pp 399 et seq. of tlie transcript of Hearings on H.R. 4347—
S9th Congress) Mr. Charles Gary, Executive Secretary of MENC. testified on
the Copyright Revision Bill (H.R. 4347) which then contained only the following
section concerning fair use . . . "Notwithstanding the provisions of Section 106
the fair use of a copyrighted work is not an infringement of copyright." We be-
lieve that the problems cited by Mr. Gary in his testimony on that day concerning
educators' use of printed music would all be fully resolved by Section 107 as it
appears in H.R. 2223 when accompanied and interpreted by and with the Report
referred to above.
The members of the Music Publishers' Association and the National Mu.sic
Publishers' Association are daily and actively involved in attempting to persuade
and encourage the best creative individuals to use their imaginations and special
talents for the creation of more and better music for America's school children
with a resulting improvement in the general cultural climate of our country. As
the late, great composer, humanitarian and internationally renowned music edu-
cator, Zoltan Kodaly, stated. "We must put an end to the pedagogic superstition
which demands that teaching material shall be constituted exclusively by a
diluted substitution of art. It is necessary to reverse this thesis : for the child,
only true artistic value is good enough. No one is too great to write for children."
If authors and composers and publishers are to work toward the creation of a
body of music for schools and indeed for churches with such a purpose as Mr.
Kodaly enunciates, they can do so only with the clear assurance that their
work will be protected and their efforts will be rewarded and not thwarted. We
respectfully urge this Subcommittee to make this possible.
;Mr. Chairman, we wish to express our appreciation to you and the members
of the Subcommittee for this opportunity to appear before you on this matter,
the importance of which I cannot overemphasize. Thank you.
TESTIMONY OF ERNEST E. FARMER, PRESIDENT, SHAWNEE
PRESS, INC., DELAWARE WATER GAP, PA.
Mr. Farmer. Mr. Chairman, my name is Ernest R. Farmer, president
of Shawnee Press, Inc., a music publisher. I appear before this com-
mittee on behalf of the Music Publishers Association of the U.S., Inc.,
the trade association of the publishers of educational, concert, and
sacred music, of which I am a past president.
In opening my remarks, I would like to thank Father Drinan for
some of the questions he put to the educator group, which, in my
opinion, did an excellent job of pointing out the unique problems of
prii^ted music.
For those reasons, the provisions of section 107 are of vital concern
to those in the music publishing busiiiess who depend on the sale or
music in the printed form ns the basis for staying in business. The
graphic representation of the creations of composers and authors —
printed music— represents a substantial part of such businesses —
in many cases, almost all of it.
The prime markets for printed music are schools and churches for
use by their choruses and bands and orchestr-as. In this sense, we are
group-music specialists, and the unit price of our publications is rela-
tivelv modest. Therefore, we look to the purchase of multiple copies of
a publication to make it commercially feasible.
As an illustration, I have here a single copy of m^e of onr choral
publications widelv snno; in our Nation's sHiools. The retail selling
price is ?)5 cents. Obviously, once the initial music enffravino: and
typography has been done, and the initial copies printed — at the sole
expense of the publislier — further reproduction by any one of a num-
345
ber of means readily available in today's schools becomes a simple
matter.
This technologically simple matter of unauthorized reproduction
by schools or churches is vitally important to our authors and com-
posers and to us as publishers. Widespread, unauthorized photodupli-
cation of our music could sap the lifeblood of our business, deprive
authors and composers of their royalties, and publishers of their basic
source of income. Such a situation does indeed exist under the current
U.S. copyright law due to misconceptions and misunderstanding and
misinformation, and the absence of clear and workable guidelines.
Let me state categorically that my colleagues and I have the highest
regard for the music teachers of America. Moreover, the relationship
between the music publishers' associations and the Music Educators
National Conference serves as a model of understanding and cooper-
ation between educational users of copyrighted materials and the
authors, composers, and publishers of those works.
As a matter of fact, the executive board of the MENC, in June of
1973, unanimously issued a statement on use of copyrighted material,
and the full text of their statement appears in my prepared remarks.
With this relationship with our primary customer group as a
background, it is important to recognize that the term "teaching" as
it relates to music ultimately carries with it the implication of render-
ing, interpreting, or performing.
The teaching of music, as it is generally understood in tlie schools,
requires the learning of skills necessary to accurately convert abstract
symbols printed on a piece of paper into a given sound within a given
time by means of instruments or the human voice. Therefore, copies
of printed music, such as this, are regularly used for the pur-
poses of teaching.
In simple, realistic terms, unauthorized duplication of printed music
for teaching inevitably means reproduction of multiple copies with
disastrous consequences to authors, composers, and publishers.
We are in favor of, and support, section 107 as it is set forth in
H.R. 2223, but in order that users of music interpret this section cor-
rectly, we believe that the explanation and interpretation which was
included in your predecessor's subcommittee report — Report No. 2237
of the 89th Congerss, 2d Session — is absolutely essential.
In my prepared statement I have attempted to demonstrate how the
proposed criteria of 107 can be susceptible to all sorts of misinterpre-
tations, particularly with rps]:>oct to the so-called criteria.
I must point out that it is not unusual for individual songs to be
published in collected form. For instance, our previous example is
also found as part of the contents of this choral collection.
If a teacher chooses to reproduce his copies for the purpose of teach-
incr from this collection, rather than from the separate publication,
would it not be reasonable for him to assume that he has satisfied
the third requirement — that is, in selecting one song from 40. the
amount and substantiality of the portion used is relatively insignifi-
cant in relation to this choral collection. In fact, our hypothetical
teacher has reproduced a complete work — words, music, melody,
harmony and accompaniment, essentially as they appear in the separate
publication previously shown.
57-786 — 76 — pt. 1 23
346
The members of the Music Publishers' Association and the Na-
tional Music Publishers' Association are daily and actively involved
in attempting to pereuade and encourage the best creative individuals
they know to use their imaginations and special talents for the creation
of more and better music for America's schoolchildren, with a result-
ing improvement in the general cultural climate of our country.
If the authors and composers and publishers are to work toward
the creation of a body of music for schools, and indeed for churches
with such a purpose in mind, they can do so only with the clear assur-
ance that their work will be protected and their efforts will be re-
warded and not thwarted.
We respectfully urge this subcommittee to make this possible.
Mr. Chairman, I thank you for the opportunity to present this point
of view. If I may add one further observation regarding section 108.
It is my understanding there was testimony given yesterday attack-
ing the exemption given to musical works in the proposed language of
108. ]May I say, this was news to us due to the fact this language has
been on "the record presumably without prior objection for some years.
Therefore, we would like to respectfully request the opportunity to pre-
pare, and file for the records, a statement in rebuttal to the remarks
made yesterday concerning 108 (h) .
Mr. IvASTENMEiER. Sucli additional comment with respect to that
question, Mr. Farmer, without objection, will be received.
Mr. Farivier. Thank you.
[Subsequent to the hearing the following statement was received :]
Supplemental Statement of Ernest R. Farmer on Behalf of the Music Pub-
lishers Association of the U.S., Inc. and the National Music Publishers'
Association, Inc. Relative to Section 108 of H.R. 2223
This statement is submitted pursuant to permission granted me by the Cliair-
man of the Subcommittee on Courts. Civil Liberties and the Administration of
Justice, on May 14, 1975, vphen I testified witli regard to Section 107.
The purpose of tliis statement is to rebut that portion of the testimony of Dr.
Edmon Low testifying on belialf of various library associations in wliieh he urged
the deletion of subsection (h) of Section 108 from H.R. 2223.
Subsequent to the oral testimony v\'e received a copy of a letter dated May 1st.
1975, to your Subcommittee from the Music Library Association (MLA) which
also urged the deletion of "musical works" from that section of the Bill.
We are certain that it was not an arbitrary decision nor an accident which led
to the inclusion of subsection (h) of Section 108 in the Bill as passed by the
Senate last September. The decision, we are convinced, is based upon recognition
of the fact that musical works differ materially from most other types of works
in library collections. A musical work is created primarily for performance by an
instrument or instruments or the human voice or voices.
To paraphrase language included in my statement before your Subcommittee
on May 15th relative to Section 107 of H.R. 2223, music consists of abstract
symbols printed on a piece of paper which are to be converted accurately into a
given sound within a given time by means of instruments or the human voice.
Thus, as I emphasized, the primary purpose of music is performance.
In its letter of May 1st, the MLA emphasizes the uses of musical works in
scholarship and sets down in considerable detail the nature of the works which
might be used for scholarship and the manner in which they are used for scholar-
ship.
We submit that there is a further special peculiarity of music which is that
the same works which are used for scholarly purposes may be and indeed are used
for the purposes of performance. Thus, there is no distinction which could be made
as to the use to which a photocopy would be made. And it is our .belief and
contention that those copies made for the purposes of performance would be
overwlielmingly more numerous than those copies which might be made for
scholarship or similar purposes. Moreover, even in scholarly works prepared and
347
published at great expense, separate individual selections included in the col-
lected works would indeed be useable for performance and we suggest that it is
this use for which photocopies would be made in most instances rather than for
scholarship.
Research and study involving a musical work are usually in connection with
doctoral theses where short excerpts of those works might be used for illustrative
purposes.
Such uses, provided they meet the foiir criteria set forth in Section 107 of
II. R. 2223, would be considered fair use. In other respects, a musical work is not
the type of copyright that can be subdivided and dissected as is the case with
medical journals, books, periodicals and compendiums of scientific writings,
information and articles.
Particularly in view of Section 107, we do not believe that Section 108(h)
presents a hurden nor in fact an inconvenience on those who would make use of
works in library collections for research and scholarship. If works of music are
not in print, the Music Publishers Association of the U.S. together with the Na-
tional Music Publishers As.sociation and the ;Music Library Association l)y joint
agreement in 1968 prepared a library requisition for out-of-print music. A copy
of this form is attached hereto.
The joint creation of this form should indicate with clarity the intent of all
parties to make access to out-of-print works simple and expeditious.
The MLA's letter of May 1st emphasizes the nature of works which might be
used for scholarship such as the collected works of various composers. Should
they be out of print, the permissions form to which we have referred above
would easily trigger permission for photocopying.
In its letter the MLA has tended to minimize the breadth and variety of its
members' collections — for every collected work of Guillaume de Maehaut there
are undoubtedly dozens of vocal scores of operas and other stage works. For
example, we would believe that every member library of the MLA would include
a vocal score of the complete music of "West Side Story" by I.ieonard Bernstein
in which there are many individual songs frequently performed as I'ecital solos.
The same is true of innumerable other vocal scores of operas and of larger piano
works of which single selections are by themselves performance material not only
by concert artists but even more frequently in student recitals.
There are many compilations containing individual selections by a number of
different composers. The songs and piano works of many composers are published
in collected form. When published separately, many of these works for voice or
for piano or chorus will probably range from two to six pages and are accordingly
easily reproducible and vulnerable to unauthorized copying. Therefore, they
require special protection and safeguarding.
Although all musical works univei'sally consist of musical notes and symbols,
accompanied or unaccompanied by words depending upon whether the musical
work is intended for instrumental or vocal rendition, musical compositions differ
and vary over a broad spectrum, and treatment of all musical works in the same
manner is not warranted. As an example, the vocal score of Porgy and Bess by
George and Ira Gershwin and DuBose Heyward is a single musical work con-
sisting of 560 pages, but includes a number of separate musical compositions, the
most popular of which is "Summertime" on pages 15, 16 and 17.
The extraction of the musical composition "Summertime" from the vocal
score of Porgy and Bess and the making of multiple copies thereof would never
qualify as a fair use under Section 107 ; no greater right should be granted by
Section 108. As Section 108 is now worded, it Avould not aflord libraries or users
such greater right but if Section 108 is changed as requested by Dr. Low and
the Music Library Association by deletion of 108 (g) (1) and (2) and (li) such
right would be available and would cloud the intent of Section 107. Tiius. "Sum-
viertinie" could be susceptible to economic destriiction by unbridled copying.
We submit that to remove from Section 108 the exclusion and protection of
music provided by subsection (h) for the convenience for the comparatively
few who do music research would jeopardize the many authors, composers and
publishers who depend upon music for their livelihoods. Such a result is not
wai-ranted by any argument asserted by Di-. Low or set forth in the IMLA letter
of May 1st.
We feel confident that the Congress will continue to agree that Section 108(h)
as it pertains to music librarians does indeed achieve a proper balance between
the needs of the music librarians and the proper consideration of the rights and
interests of authors, composers and their publishers.
348
Library Requisition for Out-of-Pkint Copyrighted Music
This form approved by Music Library Association ("MLA"). Music Pub-
lishers' Association ("MPA") and National Music Publishers' Association
("XMPA").
To I>ate
(Name of i)ublisher)
We require, for library use. the work(s) entitled :
1. If in print, please send us copies of the work(s) and bill us.
2. If permanently out of print, please sign the duplicate of this form, which
shall constitute permission by you to us to make or procure the making of
copies of the work (s ) , but only on the following conditions :
(a) The copyi-ight notice shall be shown on all copies.
(b) All copies shall be used for library use only.
(c) No recording use or performance for profit use or use other than library
use shall be made of any copy unless such use shall be expressly licemsed by you
or an agent or organization acting on your behalf.
(d) We shall pay for the right to copy pursuant to this per-
mission but not otherwise.
(e) We (do) (no not) own a copying machine.
8. If any work referretl to above is unpublished and available on loan to us,
please ad\ise the terms and conditions of such loan. If not available to us, please
insert an X here and return the duplicate of this form to ns promptly.
4. If any work referred to above is not in your catalog, please insert an X
here and return the duplicate of this form to us promptly.
Very truly yours.
Agreed to :
(Name of publisher) (Name of library)
By By
IThis form should be prepared in duplicate. Additional copies may be secured
from MLA or MPA, 609 Fifth Avenue, N.Y., N.Y. 10017, 4th floor, or NMPA.^
460 Park Avenue, N.Y., N.Y. 10022.
Mr. Kastenmeier. The next witness is Irwin Karp.
[The prepared statement of Irwin Karp follows :]
Statement of Irwin Karp, Counsel, the Authors League of America
Mr. Chairman, my name is Irwin Karp. I am counsel for the Authors League of
America, the national society of professional writers and dramatists. The League's
6,500 members include authors of biographies, histories and non-fiction books on
every subject, novels, plays, poetry, childrens' books, musical plays, magazine
articles, textbooks and other works. Several also write for motion pictures,
television and radio. And, of course, the works of many members are adapted for
use in these media. Copyright is a matter of paramount concern for our members,
the full-time professionals and those who also work as teachers or in other fields,
for their compensation as writers depends on the Copyright Act, as does their
ability to provide for their immediate families after death. I should stress at
the outset that most of our members own the copyrights in the works they create.
My testimony this morning addresses two subjects: (1) the "Educational ex-
emption" proposed by members of the Ad Hoc Committee ; and (2) demands that
your Subcommittee reject the copyright term provided in Sec. 302 (H.R. 2223) ;
i.e. the author's life-plus-50 years after his death. The Authors League supports
the term of life-plus 50 years, as it did in previous testimony to your Subcommittee
by Rex Stout (then its president), Elizabeth .Taneway, John Hersey (its current
pre.sident), Herman Wouk and myself. {Hearincjs Before f>i(bcommiftcc JVo. 3:
8J)th Cong., 1st Sess. ; Part I, Part III]. In the Senate, testimony supporting the
life-plus-50 term was given by Mrs. Janeway, Mr. Wouk and the late .John Dos
Passos. As it has in the past, The Authors League opposes the "educational
exemption" which previously has been rejected l)y both .Judiciary Committees
and therefore was not included in the Revision Bills passed by the House of
Representatives in 1967 and the Senate in 1974.
349
PRIOR REJECTION OF THE EDUCATIONAL EXEMPTION
As your Committee's Report noted, members of the Ad Hoc Committee had
requested the iusertion of "a specific, limited exemption for educational copying"
into the Revision Bill. The reasons why your Committee and the Senate Commit-
tee refused the exemption are as valid today as they were when the Report was
issued.
Your Report stated that "photocopying and other reproducing devices were
constantly proliferating and becoming easier and cheaper to use" (as indeed they
have). It also noted the contentions of authors and publishers that "education is
the textbook publisher's only market, and that many authors receive their main
income from licensing reprints in anthologies and textbooks ; if an unlimited
number of teachers could prepare and reproduce their own anthologies, the
cumulative effect would be disastrous." (H. Rep. No. 83, p. 31).
THE CONSTRUCTIVE SOLUTIONS ACHIEVED BY THE SUBCOMMITTEE
Your Report noted that "several productive meetings" were held between repre-
sentatives of authors, publishers and educators, and that "while no final agree-
ments were reached, the meetings were generally successful in clarifying the
issues and in pointing the way to constructive solutions." These solutions were
reflected in your Committee's Report, and it is fair to say they were — for a time
at least — accepted by the parties. The solutions were :
(i) The Committee's rejection of the "educational exemption", because "After
full consideration, the committee believes that a specific exemption freeing certain
reproductions of copyrighted works for educational and scholarly purposes from
copyright control is not justified."
(ii) The Committee's explicit aflBrmation that "any educational uses that are
fair today would be fair use under the bill."
(iii) Amendment of Sec. 504 (c) to insulate teachers from excessive liability
for statutory damages.
(iv) Amendment of Sec. 107 to indicate that fair use may include reproductions
in copies or phonorecords, and may be for such purposes as "teaching, scholarship
or research."
(v) A careful analysis by the Committee of the four criteria of fair use "in
the context of typical classroom situations arising today." The Committee noted
that although its analysis had to be broad and illustrative, "it may provide
educators with the basis of establishing workable practices and policies." (pp
32-36)
Actually, the Committee was modest in characterizing its analysis — it is an
extremely clear and useful set of guidelines for educators, authors and publishers.
Moreover, the Committee's analysis of fair use amply supported its judgment that
"the doctrine of fair use as properly applied is broad enough to permit reasonable
educational use, and education has something to gain in the enactment of a bill
which clarifies what may now be a problematical situation."
The Committee also urged educators, authors and publishers to "join together
in an effort to establish a continuing understanding as to what constitutes
mutually acceptable practices." The Authors League is willing, as it has stated
before, to sit down with educators and publishers periodically to establish and
review these practices, to fill out workable guidelines of fair use. This must be
done in meetings, with the parties working together. And there should be periodic
meetings so that the parties could revise guidelines in light of changing conditions.
This would enable them to deal reasonably with current practices, without fear of
creating immutable rules that could become damaging if technology or other
conditions changed in the future. The Judiciary Committee also urged the parties
to join together "to work out means by which permissions for uses beyond fair use
ran be obtained easily, quickly and at reasonable fees." Again the Authors League
is willing, as it .stated in the past, to sit down with educators and publishers to
work out these methods.
THE PROPOSED EDUCATIONAL EXEMPTION WOULD INJURE AUTHORS
If the proposed exemption, as it bears on copying, is only intended to permit
educational copying that would be fair use under this Committee's analysis it
would be unnecessary. If the Ad Hoc groups contend that the purpose is to
provide clarity then certainly the amendment should be rejected. For as we
testified before Senator McClellan, your Committee's analysis of fair use, with
350
its explicit examples and illustrations, is far more precise and instructive to
teachers than the completely vague amendment offered by the Ad Hoc groups.
Actually the purpose of the amendment is to legalize uncompensated educa-
tional reproduction of copies that goes far beyond the limits of fair use. The
privilege of making copies of portions of a work which are not substantial in
proportion to its total size would be absolute, regardless of the circumstances of
the reproduction; although some of these would clearly involve infringement
under your Committee's analysis. Under the Amendment, many copies could be
produced on an organized basis, rather than by one teacher acting spontaneously.
Multiple copies could be reproduced for many individuals and circulated beyond
the classroom. And most important, under the Amendment copies could be repro-
duced even though they had a serious adverse effect on the work's potential
market or value, and even though it would supplant some part of its normal
market. Moreover, the proposed exemption would permit educators and institu-
tions to reproduce copies of entire short works. How short is short? Would a
poem 2 pages long be fair game for educational reprinting? or 4 pages? or 6 pages?
Would the Amendment allow a story or article 5 pages long to be reproduced
in multiple copies? or 10 pages? or 15 pages? Moreover, as with excerpts, the
exemption would allow educators to reproduce these copies under a variety of
circumstances that would make them an infringement under your committee's
analysis of the four criteria of fair use.
As we noted in our statement on library photocopying yesterday, and in our
previous testimony, many authors earn a major portion of their income by
licensing the reprinting of poems, articles, short stories and portions of longer
works in anthologies, textbooks, collections and similar books. The same poem or
story may be reprinted in several of these, and the accumulation of small fees
produce a modest income — often the largest part of the income authors of
valuable literary works earn from their writings. These anthologies and other
collections are sold primarily to high schools, colleges and universities, and their
libraries and book stores. Their students are a primary audience for eminent
poets, essayists and short story writers.
The proposed educational exemption would allow educators and institutions
to produce copies of an author's short works and portions of longer works, thus
displacing the sale of the anthologies textbooks and other collections that previ-
ously brought these works to educational institutions. Many authors \^'ould thus
be deprived of a substantial or major portion of their income, even though their
works wovild still be widely used by educational audiences, disseminated by
uncompensated educational reproduction that far exceeded the limits of fair use.
[Although some educational spokesmen have said they do not intend to "anthol-
ogize", it should be noted that the effects are the same whether several short
works are provided at one time between covers, or are produced and distributed
by the school seriatim.]
THE WILLIAMS & WILKINS DECISION
The Ad Hoc Committee's excuse for requesting the exemption in the Senate
was that the Trial Judge's decision in Williams d Wilkins created uncertainties
as to fair use. As we there pointed out. this was a feeble excuse for disrupting
the constructive solutions reflected in your Committee's prior report. It would be
an even feebler excuse now, considering the majority opinion in the full Court
of Claims. As your report correctly stated, fair use — in the case of library copying
as tn other in.stances — ^depends on tlie four criteria "and the facts of the partie-
iilar ease." (Emphasis ours). The trial jiulge confined his decision to the facts of
that case, stressing that the large scale reproduction of copies involved "was
wholesale copying." The facts before him bore no resemblance to the various fact
situations involving educational copying and other uses which yonr Committee
considered in spelling out its guidelines and analysis of fair use vis-a-vis educa-
tional copying. Nothins: in the trial court's ooinion cast any doubt on your
Report's analysis of guidelines. And there is even less reason for Ad Hoc Com-
mittee spokesmen to contend that any doubts have been cast unon them by the
majority opinion in the Court of Claims wbir-h reversed the judcnmeTit be^ow and
dismissP'd Williams & Wilkens comnlaint. The majority opinion did not imperil
fair use in education or detract from your conclusions, nor did the minority
opinion.
THE "other" arguments
As we noted in our testimony on library photocojwins:. Ad Hoc Committee
spokesmen are wont to accompany their demands for an "educational exemption"
351
with a variety of attacks on copyright. Some of these we discussed yesterday:
the •■monopoly", "restraint of information" and "mere privilege" claims. As to
the others :
Ad Hoc spokesmen contend that uncompensated educational copying beyond
the limits of fair use must be legislated because it allegedly "promotes" the
progress of science and art. This misses the very point of the Constitution's
copyright clause, which intended that authors be granted "valuable, enforceable
rights" to encourage them to produce works of lasting value. Granting rights,
not destroying them, was how the Constitution intended to promote the progress
of science and art. Compensating authors for uses of their work, not depriving
them of remuneration, was the method chosen by the Constitution. Authors
whose works are used in schools make a positive contribution to the educational
process, and for reproduction beyond fair use, they are entitled to compensation.
As your Report noted, "the educational groups are mistaken in their argument
that a 'for prolit' limitation is applicable to educational copying under the
present law."
Ad Hoc Committee spokesmen have argued that any copyright limitation on
uncompensated educational copying beyond fair use restrains "freedom" to read
under the First Amendment. This utterly fallacious argument was made by them
in the Williams & Wilkins case, and was completely ignored by majority and
minority opinions. The First Amendment was fashioned to assure unfettered
interchange of ideas (Sullivan v. N.Y. Times) and it is axiomatic that an
author's copyright does not prevent anyone from discussing or repeating his ideas
(Rosemont v. Random House). The Supreme Court has never interpreted the
"freedom to read" under the First Amendment to mean that copyrighted works
must be provided free of charge ; and it has frequently emphasized that there is
no conflict between publication for profit and the First Amendment. Under the
xVd Hoc theory of "freedom to read", teachers and librarians should work without
pay, colleges should cease charging tuition and the Xerox Corporation should be
denied copying fees when its machines reproduce "educational" materials.
Our discussion has focused on the copying aspects of the Ad Hoc Committee's
proposed exemption, but the Authors League opposes its other provisions as well.
It would be highly dangerous to add an "input" exemption with respect to com-
puters. And the educational community is not entitled to further additions to an
already too-broad television exemption.
LIFE-PLUS-50 YEARS
The Revision Bill would establish a single term of copyright for new works,
lasting for the author's life and 50 years after his or her death. This is the
copyright term employed by most other countries. Existing copyrights would
continue under the present system : a first term of 28 years which can be renewed
for a second term, that would be enlarged from 28 to 47 years. [Sees. 302, 304]
As in prior hearings, the Authors League strongly supports these provisions.
We urge your Subcommittee to retain them and to reject demands by Ad Hoc
Conmiittee spokesmen to turn back to the present two term system, and proposals
for a single term of shorter or different duration. Your Committee's Report noted
there "was overwhelming support for a life-plus-50 system", and this was based
on sound reasons which are analyzed in the Report.
THE "increase" IN TERM
The Report cited findings by the Register of Copyright that a life-plus-50 term
would, on the average, add no more than 20 years to the present 56 years. It
would add very few years, sometimes none, to a work published later in an
authors life.
On the other hand, life-plus-50 would drastically reduce the period of protection
now available to unpublished works and those published long after an author's
death. Under our dual system, a work is protected absolutely until it is published.
200 year-old diaries, 150 year-old letters cannot be used by historians or scholars
because their ov/ners have absolute property rights under common law. And
when any unpublished work, no matter how old, is published — it receives another
56 years of protection under the present Act. Mark Twain's Letters From the
Earth was published decades after he retui'ned to it. The memoirs of a Civil
War reporter, who wrote here in Washington, was first published in the 1960's.
Both received .58 years of statutory protection on publication. Under the pro-
posed life-plus-50 term, copyright would have terminated 50 years after the
352
author's death, as it would for all unpublished (as well as published) journals,
books, letters and other works. Authors like Ernest Hemingway would no longer
he able to pro%ide for their families by leaving unpublished novels to be issued
years after their death.
THE KEED FOR MORE ADEQUATE PROTECTION
With an increasing lifespan, authors outlive their copyrights. Many are unable
to provide for their immediate families since their renewal copyrights exi)ire soon
after their death. Their mves, husbands and children are denied any share of
the income their works continue to produce for others — compensation their
families would have under a life-plus-50 term.
Widows of illustrious American authors have outlived their husbands by several
decades. In their advancing years, the only income which i)ermits some of these
Avidows to live in dignity and a semblance of comfort are the royalties from great
works written by their husbands. This income is taken from them when the re-
newal copyright expires. Under life-plus-50 they would continue to receive this
desperately-needed income. Ours is the only western country which denies aging
authors or their surviving families this income. All the others have a copyright
term of live-plus-50 (or more) years.
It should be rememliered that life-plus-50 years benefits only those authors who
created books, plays and music of suflBcient value to survive. And I should stress
that it is authors, and the families of deceased authors, who will benefit from the
longer term. They would receive at least 50%, and often all. of the copyright
income from their books, poetry or plays during the extended period of protec-
tion— because of the "reversion" provision, and the nature of publishing arrange-
ments most professional authors make. Life-plus-50 years would not provide
windfalls for book publishers, and is not a matter of grave concern to them.
LIFE-PLUS-50 IS JUSTIFIED BY THE ECONOMIC/LEGAL REALITIES OF THE COPYRIGHT
SYSTEM
As we stressed in our testimony yesterday, the instrument chosen by the Con-
stitution to serve the public interest — to secure literary and scientific works of
lasting value — is an independent, entrepreneurial, property rights system of writ-
ing and publishing. The free-lance author must earn his living from income pro-
duced by the books, plays, articles, poems, etc. he creates. He must look for his
income to the payments made for their various uses — so long as he retains his
copyright.
Whether or not copyright is "property" (and it is), the author is required to
survive as a property owner. He is not paid an annual salary. He writes at his
own risk. Some of the greatest literary, dramatic and musical works contributed
to our society and posterity would not, even under life-plus-50. provide their au-
thors with adequate compensation for the value of their contributions to society.
But these authors are entitled to at least that much for themselves and their
families. In this connection, it should be stressed that an author's compensation
consists of an accumulation of royalties, often small, for uses of his work over a
period of many years. These uses are made by reprint publishers, book clubs,
anthologists, periodicals and others, as well as by his initial publisher. Once his
copyright is lost, all of these other users are free to produce income fi-om his
books or other works without paying any compensation to him or his family.
Often an authors works do not commence to earn income for him until .vears
after they are published, when he has finall.v won recognition. Often a book is
discovered or rediscovered thirty years or more after it was originally published — -
and for the first time becomes a commercial success. Its useful copyright life
under our present system may be only 15 or 20 years near the end of the term^ —
not 56 years.
Moreover, the author faces the constant risk that two or three years of work
may go down the drain — his book or play may be a literary success but a finan-
cial failure. Throughout his career, only two or three works may produce siib-
stantial income for him. These must compensate him for a lifetime of writing —
which may have produced several works which, although financially unsuccess-
ful, are of lasting value to society.
Under these circumstances, the Authors League does not believe a term of copy-
right ending 50 years after the author's death is "too long". The author must pro-
duce his works under the risks and hazards of an entrepreneurial system. He is
entitled to receive a small measure of the protection accorded to other, often less
353
productive, entrepreneurs who are entitled to hold property rights not merely for
life-plus-50 years, but for 5. 10 or 20 generations.
THE PUBLIC INTEREST
A life-plus-50 term does not damage the public interest. Opponents argue that it
would sharply curtail availability of works ; and that it increases prices too much.
Neither argument has substance.
Copyright does not diminish the availability of books, plays, music etc. Indeed,
as this Committee's report noted, the loss of copyright is often likely to have that
effect. Actually availability of copyrighted works has increased in recent years.
Mass-market and "quality" paperbacks offer a myriad of titles. University Micro-
films and similar organizations now fill orders, on demand, for countless books
that formerly were out-of-print ; under licenses from authors and publishers. We
approach the ix>int when a few copyrighted books will be out of print. And these
companies also provide entire back issues of countless journals and other publi-
cations on microfilm and microfiche. These techniques are also used, increasingly,
to keep technical, scientific and other books available.
If works were protected for life-plus-50 years rather than 56 years, their cost
to the public would not increase substantially, if at all. As the Committee report
stated : "The public frequently pays the same price for works in the public do-
main as it does for copyrighted works, and the only result (of copyright ter-
mination after 56 years) is a commercial windfall for certain users at the au-
thor's expense." The price of a paperback book is not reduced, for example, when
the author's copyright expires. But the share of the income it produces, previously
paid to the author or his family, can now be pocketed by the publisher or other
users.
Moreover, this "cost" argument should be put in true perspective. Copyright
opponents do not propose that when a work goes out of copyright, a publisher
who reprints it must sell it at a lesser profit, or at a price fixed to assure that the
public will be able to buy it more cheaply than copyrighted works ; or that broad-
casters or theatres be required to charge the public less for performances of
works whose copyrights have expired ; or that actors, teachers or musicians work
at a lower salary when performing or teaching works which have fallen into the
public domain — to reduce the cost to the public.
DETERMINATION OF COPYRIGHT STATUS
For many reasons, copyright status is not easy to determine under the present
two-term system. It is simpler to determine under life-plus-50. We have discussed
this issue in our previous testimony and beg leave to refer to it. As your Com-
mittee's report noted, the system of life-plus-50 years "has worked well in all other
countries, and on the whole it would appear to make computation of (copyright)
terms simpler and easier."
THE RENEWAL CLAUSE
Life-plus-50 years would eliminate our present renewal system which has
caused several authors to lose copyright after the first term through failure,
due to ignorance or inadvertence, to file renewal applications. The "reversion"
clause in the new Bill would give authors protection against long-term assign-
ments of their rights — the purpose for which the renewal system was chosen by
Congress in 1909 over life-plus-.50. And a purpose which was largely frustrated by
the Supreme Court's decision in Fisher v. Witmark, and subsequent decisions.
While the renewal clause puts material into the public domain after 28 years
if the proprietor does not renew, most of this is actually worthless — catalogs,
advertisements, labels and the like. As your Report mentioned statistical studies
by the Copyright Ofiice indicate that "most material which is considered to be of
continuing or potential commercial value is renewed.''
OTHER ADVANTAGES OF LIFE-PLUS-50
Life-plus-50 would establish a single copyriglit system in the United States,
replacing the present dual common law-statutory system. It would also provide
uniformity mth the laws of other countries, a matter of increasing importance as
many classes of works are disseminated, often simultaneously, in several nations.
The advantages of both consequences have been reviewed in our previous testi-
354
mony and undoubtedly will be described to you by the Copyright Office. Several
of these benefit users.
For the reasons discussed above, the Authors League respectfully urges that
the adoption of a life-plus-50 copyright term is completely consistent with the
letter and spirit of the Constitution's copyright clause. The first, most important
and indispensable contribution to the public interest — i.e. securing the produc-
tion of works of lasting value — is made by the author. Until he creates his book,
play, music or poem, no one can disseminate it, exploit it, teach it, or systemati-
cally copy it — without paying him. The Constitution intended that he have "val-
uable enforceable rights" to encourage him to serve this public interest and to
permit him to be compensated for his talent and labor. The period of protection
provided by life-plus-50 is a reasonable and necessary method of accomplishing
that Constitutional purpose. And until some author discovers the secret of immor-
tality life and 50 will be a limited term of protection, much more limited than
the 100 or 200 or more years of protection possible under our present common
law-plus-56 years of protection.
TESTIMONY OE IRWIN KAEP, COUNSEL, THE AUTHORS LEAGUE
OF AMERICA
Mr, Karp, Mr, Chairman, thank yon very mnch.
My name is Irwin Karp ; I am connsel for the Anthors League of
America which is a national society of professional writers and
dramatists.
In my prepared statement, which I respectfully submit for the rec-
ord, I mention briefly at the outset the types of works that our members
write. It covers the whole range of creativity.
In my testimony this morning, I address the educational exemption
as it has been offered to the House and Senate, and has been rejected,
for the sound reasons in your previous report and in the Senate's report.
I would also like to speak, in the very limited time available, to the
problem of the life-and-50-years term of copyright, unless that is to
be discussed at some later date.
I think perhaps I should put something into the record at this point
on that. It is a much-abused concept, and as was ])ointed out when the
educators were propounding their opposition to life-and-50, and plac-
ing their opposition on grounds that have no basis in reality, or even
in decency or common sense.
First of all, Professor Raskincl told us we are talking about tlie
scholar copying by hand. That is not so. We are talking about exemp-
tion and what has been proposed to you in the light of a technological
revolution that created, as I described yesterday, and as Mr, McKenna
of the Special Library Association named, a medium of one-at-a-time
reprinting or one-at-a-time publishing,
I put into the committee's hands, some semblance of what the tech-
nology has accom]ilished, including an entire book that is reproduced
on demand by the Xerox machine.
When we get to multiple copy, unless there is some prodigious pen-
man out at the University of Minnesota law school, I do not know how
anybodv is going to copy by hand 40 or 50 copies of a short story or a
poem. The technology has also armed the educational system of this
country with various wa3^s to very cheaply copy various v/orks of
instruction.
Your committee, in its report, and the Senate committee, using that
work — I am talking about the work you did so well — said the case for
an educational exemption had not been made. Under the doctrine of
355
fair use as expounded very specifically in your report, guidelines were
set up for what was and w^as not fair use.
If you examine the guidelines, and examine the proposed amendment,
your guidelines are much more explicit and useful than the amendment
l^i'oposed by the educators. If clarity is the objective, they have cer-
tainly failed miserably. Certainly their amendment does not teach us
how short a short stor}^, or how short a poem, can be copied.
Teachers will be coming back to you in a short time, asking you to
wi-ite into law, the lengths of particular works.
What you then suggested to us, and something we have sought to
do in the interim, is to sit down w^ith the educators and work out
guidelines of fair use. This is the only useful way of dealing with this
pioblem. Practically every example given to you today, from the pic-
ture of the frog, up or down, is fair use. And the people who give you
the examples know it is fair use. They know that we think it is fair use.
If we sat with them pei-iodically, as 3^ou propose, reviewinq- in the
context of current condition of education, the current coTidition of
publishing and writing, the problems of fair use, we could vrork out
guidelines that would be helpful and direct and useful to everybody.
If we sat down periodically, none of us would be frozen with fear
that what we conceded or opposed as fair use today would be a dan-
gerous precedent to plague us forever.
In other words, an ongoing review that would consume mucli less
time than our colleagues who testi,fied before us and we now have con-
sumed on the problem of copyright revision would be much more useful.
You also propose that where copying exceeds the bounds of fair use,
as it often does, and as our educator colleagues would like to have it do,
that reasonable clearance arrangements be worked out for the payment
of reasonable compensation. That is a suggestion picked up by one of
the witnesses in the preceding panel. I think it is one that is easily
workable.
The alternatives are not, as Professor Raskind said, either copy the
convrighted worJc without payment or not use it at all.
There is a third alternative. That is where it exceeds fair use to obtain
permission and pay a reasonable fee for it, as I will point out, and not
something extravagant. May I also point out in elaboration of the point
Mv. Pattison made, it is the author's right, where the wo^k is b^ing
uspd bevond the limits of fair use, to sav what his compensation will be.
Our educational brethren turn their backs on the open market, the
free market, and ignore the play of economic force. The Constitution
Avi'ote for us a copyright clause that according to the Supreme Court
was to establish authorship and publishing on a profit motivated basis.
As expected, what actually has happened, when an author of a short
story or poem or publisher grants a right to use it in an anthology, is
that he grants a nonexclusive right to use that work that may appear
in 30 anthologies. The price is a competitive price. The competition in
the mavketplace actually produce fees that are very reasonable. Some-
times, $25, sometimes $50, sometimes less per use, sometimes more.
Let me point out that the American author, most American authors,
do intend to make income when they write a work, whether they ai^e
full-time professionals or not. The use of their work in anthologies is
a major source of income to them. For poets and short story writers,
as we testified before, and many of our author members have testified,
356
this is a principal form of compensation. Most poets do not make
money from the publication of a collection of their verse in the hard
cover edition. It is from the fees derived from nonexclusive licenses to
a number of anthology publishers to reprint copies of these works,
John Dos Passos testified before the Senate that 20 percent or more
of his income in the latter years of his life was derived from this source.
Eobert Frost, Carl Sandberg — many American poets — have earned a
good portion of their income from these anthologies. These are pub-
lished primarily to be used in schools, universities, and similar
institutions.
I give you two current examples ; the evidence is all around us. Just
recently, a young lady named Joanna Kaplan published a book of
short stories that received great critical acclaim. In an interview in the
Xew York Post she said it took her, after writing the first short story,
another 5 j^ears to turn out the other stories in the collection, one of the
reasons being the rest of the time she worked as a teacher of retarded
children.
The only real income that an autlior like Miss Kaplan will derive
from her work over the years are the fees that will be paid as that short
story is duplicated in anthologies.
I "have another clipping from a local newspaper up in Westchester
about an author named Frank Rooney. "Since 1925," says Rooney, "I
have been a fulltime writer. I have put in 40 hours a week.
"I have done that for 25 years." And he is most widely laiown for the
much anthologized story, "The Cyclist" which his two sons and daugh-
ter, much to their amusement, had to read in English class in Rye Neck
High School — to their amusement and his small profit, I might add.
It sold to the movies, it was named "The Wild One" and it was a mo-
tion picture by Marlon Brando.
Two simple examples of what this means in dollars and cents.
T\1iat the educational exemption means, in a practical sense, is edu-
cators all over the country would be entitled to reproduce multiple
copies of short stories. It could be these short stories as far as we know,
because they have not defined the length of short stories for us. Short,
shorter, or longer.
What it means is that the use of these works will replace the sale of
those anthologies on which Mr. Rooney and Mr. Dos Passos, and other
distinguished American authors, have relied to derive some kind of
compensation from a lifetime of professional writing.
I should point out that the damaging effect will be the same whether
the school or the school system reproduces these stories and puts them
together in what is called an anthology, or Avhether they are repro-
duced one copy at a time. As far as profit motivation is concerned, I
followed with interest, Mr. Pattison's colloquy with — I should not say
friends ; in this context we are not friends — my acquaintances in the
earlier panel. I think it is useful to remember that everybody is moti-
vated by profit to some extent. I cannot believe that the teachers who
go on strilie in a city school system, close down the schools, denying ac-
cess to the students for 3 or 4 or 6 weeks, do not have some sense of
profit motivation. They want to earn a reasonable living, and they are
entitled to it.
On behalf of the Authors League, I take no position on teacher's
strikes. As an individual, I do not dare to take a position because I do
357
not know how the members of this panel feeL IMy point is, teachers are
profit motivated. It is nonsense for them to sit before you and make be-
lieve that they all go to work everyday for the sheer joy of it without
expecting to be compensated. Of course they do, as do the rest of us.
All that authors are asking for is that you do not write into this law
exemptions which would seriously injure their right to derive some
reasonable compensation for their work. You have been told that there
is an educational exemption based upon a "for profit"' concept; tliat for
some reason, those uses which are made by nonprofit institutions are
exempt and those by profit institutions are not.
That is not true. It is not true because as your committee pointed out,
it is clearly the law in the present act that there is no such thing as a
nonprofit exemption for reprinting copies of library or musical works.
The Copyright Office concluded that on the basis of a study which it
made at your request, and you reaffirmed it in your report.
I would like to turn briefly to life and 50 years. I hope I am not us-
ing the word "briefly" loosely.
The report of this committee recited findings by the Register of
Copyrights that a life-plus-50 term on the average would add 20 years
to the present 56 years of copyright. It would not double it, as I gather
some Government agency told you. On the average it would add 20
years ; in some cases it would provide a shorter term than authors now
get for works published at the end of their careers, under the present
law.
On the other hand, life plus 50 would drastically reduce the period
of protection now available to unpublished works and those published
long after an author's death. Under our dual system of common law
copyright, followed by statutory copyright, a 200-year-old diary of a
Eevolutionary War hero, a 150 year old letter, or any unpublished
work — no matter how old — receives another 56 years of protection un-
der the present act after it is published.
Mark Twain's "letters From the Earth," published decades after he
^^rote it, were given 56 years of copyright. The Memoirs of a
Civil War Reporter, written here in Washington during the war, was
first published in the 1960's. They were protected from the Civil War
to the 1960's under common law, and then had another 56 years under
the statute.
For goodness sakes, I cannot understand how educational spokesmen
will sit here and tell you that replacing that system by a term of life
plus 50 years denies access. It increases it and expands it enormously.
Fifty years after the author's death, everything he wrote will go into
the public domain — published or unpublished — and access would be
complete for historians, scholars, and others. Authors like Ernest
Hemingway would no longer be able to provide for their families by
leaving unpublished novels to be issued years after their death.
Many authors have outlived copyrights. Even more important,
many are unable to provide for their immediate families since their
renewal copyrights expire soon after their death. Widows of illustrious
American authors have outlived their husbands by decades, and in
their advancing years, the only income that permits some of these
widows to live in dignity and a semblance of comfort are the royalties
from great works written by their husbands.
358
This income is taken from them when the renewal copyright expires ;
after 56 years. It does not benefit education one whit to deprive them of
that income. It does not have anything to do with access. Under life
plus 50, these widows, and the other survivors — the immediate survi-
vors of an author — would continue to receive such desperately needed
income. Ours is the only Western country that denies aging authors, or
their surviving families this income. Every other country has life and
50.
The educators and the scholars of other countries have had no diffi-
culty in proceeding with their work, despite what is claimed to be this
heavy burden of life plus 50. 1 doubt that that is a serious problem for
American education. If it is, we are in a sad way. They have much
more serious problems to cope with than this. The problems of teach-
ing the young of this country are not affected one whit by a term of life
and 50 years for a novel by Ernest Hemingway, or a composition by
Aaron Copland, or Irving Berlin for that matter.
It should be remembered that life and 50 benefits only those authors
that create plays and books and music tliat have the quality or the
merit to survive. The others have long since gone.
If educators are running around photocopying 40-year-old works no-
body wants to read, I doubt anybody would pay attention to them any-
way. Why they would want to do it they have not explained to you.
I should also point out, under the entrepreneurial system, which
tlie copyright clause of the Constitution provided, the freelance
author must function as a property owner whether or not he is. I
think he is as a matter of law. The fact is, he must survive that way.
He is not guaranteed a salary by the government, thank God, and the
libraries and schools do not support him on some sort of an annual
guaranteed wage. All he has is the income produced by uses of the
books and plays he writes. That compensation, which often is an
accumulation of small fees over a period of many years, can be
received by him only as long as his coj^yright survives, and his family
can only receive income for a reasonable period after his death if
the copyright survives.
Often an author's works do not commence to earn income until years
after they are published. Many American composers have produced
music for 10, 30, 40 years before they have achieved recognition.
The same is true of poets and many novelists. Only at the end of their
lifetime does their work really have any sort of value under the present
56 years system. The usable term is really 15 or 20 years at most.
Under life plus 50 there would be a reasonable opportunity for
the authors of the great works that survive to receive some income
in their last years, and provide for their families.
On top of that, the copyright system requires the author to risk —
that is w^hy we keep referring to it as entrepreneurial. He spends 2
or 3 years on a book or play; it may fail financially even though it
is a great artistic or literary success. He may only, in a whole life-
time, write two or three works that produce income of any significance.
He has to look to that for his livelihood for the whole "period. He is
entitled to some sort of reasonable protection for his work for a rea-
sonable period of time.
I remind you, we do not impose a life plus 50 on any other property.
There are enough people holding property that their great, great
359
grandfathers got under land grant acts and other grants of Congress.
They did not create anything, they were merely given something out
of the public domain. That property right continues forever.
I think it was Shaw that said the argument is not why an author's
right should last for life and 50, but why the other fonns of property
should last a longer period of time.
We are not asking you to abolish our present system of tenure for
any other kind of property. All we are asking is for a reasonable
period of time for authors.
Life plus 50 does not curtail the availability of books. It is ironic
that that argument should be made in the age of technology which
will keep everything in print. I gave you as one small example, the
book produced by Xerox Co. on demand. A 429-page book by an
author, a professor, actually, of English teaching at the University
of Illinois. That book will be available forever.
The Xerox Co., and similar companies, are accumulating, with the
permission of authors and their publishers, under license arrange-
ments, an enormous library of books and journals which will be
reproduced on demand.
In addition, the mass paperback revolution has provided us with
a myriad of works in copyright, many that have been copyrighted for
many years. If there is a demand for works, they will be produced.
On top of that, as your committee recommended, where education
wants access to the copyright material beyond the access of fair use,
licensing arrangements can be made for them.
In this connection, I might note that no one had come before your
committee to propose that when a work falls out of copyright and
goes into the public domain, someone who wants to reprint it should
be required to do so at a lesser price so the public will benefit from
the loss of copyright. Usually the price stays the same. The only
difference to the public is the money the author would have gotten
now goes into the publisher's pocket, or the producer's pocket.
Teachers do not teach for less when they are teaching public
domain materials, and actors and musicians do not receive a lower
salary for performing an opera or play in the public domain than
for one which is still in copyright.
As far as the renewal argument is concerned, I am afraid you have
been treated to a slightly out of context reading. You were told that
the copyright office studies established that 85 percent of all material
was not renewed. What you were not told is that the same study said
that catalogs, advertisements, labels, and the like, made up the bulk
of that 85 percent.
The Copyright Office went on to say, "Most material which is con-
sidered to be of continuing or potential commercial value is renewed."
I know of no author who has failed to renew a book or a poem or a
piece of music deliberately. The difficulty with the renewal clause for
authors is it becomes a trap for those who do not remember, or have
never known, that in that act — which is supposed to protect them —
is a clause that says, if you forget to file a piece of paper in the 28tli
year of your first term of copyright, you lose it.
All that education gets in the way of valuable material are those
few works that are lost througli inadvertance. I have personally known
of the widows of authors, and some other people, who have lost
360
income because of this. And it was not by any desire of their husbands
to deprive them of this income.
Life plus 60 would also establish a single copyright system in this
country, as I pointed out, and would make miiformity with the laws
of the rest of the civilized world much easier. The Copyright Office
undoubtedly will speak to these.
I would close, and I thank you for giving me the time to say this,
with the observation that the most important and indispensable con-
tribution to the public interest in copyright, which is the securing
of the production of works of lasting value, is made by the author.
Until he creates his book or play or music or poem, no one can dis-
seminate it, no one can exploit it, no one can teach it, and no one can
systematically copy it with or without paying. It will not be there
to use.
The Constitution intended that he have "valuable, enforceable
rights" to encourage him to serve this public interest and to permit
him to be compensated for his talent and labor.
I respectfully submit to the committee that the life plus 50 years
is a reasonable method of accomplishing this purpose. Until some
author discovers the secret of immortality, life plus 50 will be a lim-
ited term within the constitutional meaning, much more limited than
the 100 or 200 or more years of protection possible under our present
system of common law plus 56 years.
Mr. Chairman, I thank you for your forbearance and the oppor-
tunity to make this statement.
Mr. Kastenmeier. Thank you very much.
Let me ask all the panel — I take it there is general acceptance,
particularly as it concerns educational uses, sections 107 and 108
of H.R. 2223 in its present form. To the extent that that is not the
case, would any of you care to elaborate?
Ms. Linden. j\Ir. Kastenmeier, as I said earlier, yes, that is the
case. We have had substantial rights curtailed. We recogiiize that
modern technology leaves us no alternative; however, we urge that
any Solomonesque decision not cut us in half. T^ave enough of us
alive to proceed and create, package, and disseminate intellectual
property. I think that is the consensus.
Mr. Karp. The answer of the Authors League is yes.
Mr. Farmer. With regard to music, our answer would be yes-—
with the hope that the prior report would be included as a part of it.
Mr. ZuRKowsKi. We would be, yes.
Mr. Kastenmeier. Of course, there are other aspects which one
or more of you may return to testify on, in terms of the bill ; so I
will not ask you about other aspects of the bill, but let me ask you,
did you sympathize at all with the educators, in terms of what
appears to be a persistent theme, that there is substantial uncer-
tainty, lack of clarity, of fair use, either under this bill or present
law — or that this uncertainty leaves teachers and educators generally
in a vei-y difficult position with respect to what they can reasonably
anticipate is infringement?
Mr. Karp. Mr. Kastenmeier, I want to answer very briefly, and
then turn to Mr. Lieb.
I do not sympathize for this reason: There is a solution to their
dilemma which they have steadfastly not wanted to attempt. That is to
361
follow your advice and sit down and work out guidelines for fair
use. That is a practical, sensible, reasonable, fair way of resolving
this.
As other witnesses have pointed out to you, a statute could never
deal adequately with a concept of fair use. It would read like the
Internal Revenue Code and then 3'ou would have to have four vol-
umes of regulations to supplement. I use hyperbole. It would take
about six pages to do it, really. But working out guidelines enables
both sides to cope with the problem directly and practicall}' ; and
also, if they do it on a continuing basis, it does not freeze them into
the very result you are seeing now. Both sides are coming to you,
bargaining for the best bargain. I think we really have gotten the
poorest part of it so far.
Actually, this bill does not give authors of books a windfall. Life
and 50 will help those few great works that survive, and I think
they are entitled to it. There is not a provision in this bill that is going
to add a nickel to the income that any author is going to be able
to get on his work the day after it is passed. This bill makes very
basic and needed adjustments in the system of copyright notice and
registration and other mechanical matters that benefit everybody,
educators and librarians as much or more than us. This is not a bill
that permits authors of books to make more money. There will be a
modest adjustment in the compulsory license clause on music which
is long overdue, and a far from adequate payment to composers under
the jukebox clause. But as for our urging you to put money in the
authors' pockets — nothing could be further from the case.
Under present law, which has some defects, but which has protected
authors, by and large, except for cable television, they have been
able to survive very well under it, as have publishers. I think that
the right answer to your question is, you cannot deal with this fear
of educators beyond what you have done. The report you had pre-
pared in 1966 and 1967 was a reasonable solution and would have
worked, had we spent our energy since then working out the guide-
lines you proposed.
Mr. Lieb.
Mr. Lieb. I would like to supplement that by saying, for the last
5 years or more, we jointly — publishers, authors, and others inter-
ested in the copyright side — have steadfastly attempted to bring the
librarians, as we told you yesterday, and the educators, whom you
heard today, to the table to talk with us about the formulation of
guidelines.
There is no way, no way by statute, as Mr. Karp just said, that this
can be solved. We are not only ready, we have been ready; and we
desire to work out guidelines which will be of assistance to the class-
room teacher.
I sympathize with the classroom teacher. I do not think they haA^e
been well served by the people who speak for them. If guidelines
ample enough to help the teacher in his classwork were prepared,
most of the problems that were discussed today would disappear.
Mr. Meell. I would like to add to that, that the audiovisual
publishers have taken a very active campaign of seminars, journal
articles, and face-to-face meeting with professional groups and school
people to help them come to grips with what is fair use and what
57-78G — 7G— pt. 1 24
362
is not ill fair use — National, State, and regional meetings. We will
continue that activity.
Mr. Bender. Another example of that : I was personally requested
by the Minneapolis public schools, about 3 months ago, to participate
with them and their attorneys in drafting a copyright rule of thumb,
if you want to call it that, or a code of conduct where a group made
up of representatives from throughout the ]\Iinneapolis school dis-
trict, plus their attornej's, sat down w^th me, as a representative of
the media producers, to work out a feasible way in which we could
cooperate in this very difficult area. These things are being done by
those who wish to cooperate with us. We continue to do this as time
goes on.
Ms. Linden. ]May I add one comment ?
As we listened this morning, every time, whether it was Mr. Rails-
back or Father Drinan or anyone else, or Mr. Pattison, try to distin-
guish— Mr. Wiggins did, too, at one point — between the right of
access, the right to use, and the desire not to pay, we were always
moved back by the educator's representatives into the confusing-
examples of the most obvious, limited kinds of uses, and they never
would say, except for one or two people, that they did intend to pay,
except where fair use was applicable.
I remember Dr. Wigren, specifically, and counsel, Mr. Rosenfield,
when it came to payment, they feel that nonprofit educational insti-
tutions ought to get intellectual property gratis, piecemeal, a piece
at a time, which is the way you teach. You do not teach the whole
book in one day. That is their intention, and that is why we have
not been able to get together to establish guidelines. They will not
accept the principle that authors and publishers need to be paid,
just as their salaries are paid.
Mr. Kakp. Mr. Chairman, I would like to point out there are two
separate problems, as far as fair use is concerned, that can be attacked
whether or not they are willing to accept the requirement of pay-
ment by the passage of this bill.
We are ready to sit down and talk now about what is fair use and
does not have to be compensated for. We will leave to the higher
authorities the resolution of the problem of wdio pays when you go
beyond fair use and whether there should be payment, which we
obviously, in all these statements, believe there should be.
Mr. Meell. If you eliminate the protection provided by 108(g)
(1) and (2), there is no urging, then, to consider these guidelines.
The exemption of copyright input is another example of the erosion.
Just give us input, now, and we will worry about how to protect the
author's rights subsequently. If you adopt those exemptions, you
eliminate the framework within which discussions on guidelines
can proceed.
Mr. Kastenmeier. Thank you.
I just have one more question, INIr. Karp, in reference to Mr. Patti-
son's question — whether the renewal clause ought to be retained.
You indicate that the 85 percent not renewed, most of which is
actually worthless — catalogs, advertisements, labels, and the like —
is it your point of view that this category, this worthless category,
as you suggest, should have 75, or life and 50, coverage, along with
the rest?
363
iVIr. KARr. The only problem you face in answering that ques-
tion is who sits in esthetic judgment over what is worthless or not.
From a practical viewpoint, the worthless material which falls into
the public domain under the renewal clause is material that no one
would copy anyway, unless some place, somewhere, there is a teacher
who wants to copy the label on a beer can manufactured in 1930;
who would want to do it. And if he wants to do it, are we going to
change the copyright law for him? The rest of the copyright com-
munity of the world has found that life and 50 works. It is going to
be liard to tailor a renewel clause to that. You might ; it is not incon-
ceivable ; it is technically possible. The burden would not be worth it.
Basically, I think the problem is protecting those works who sur-
vive for life and 50 vears.
]Mr. Kastenmeier. It may be an additional problem, but a ques-
tion you raised is who would make that determination. The answer
is quite simple: The owner of the copyright.
iSIr. Iv^vRP. If, for example, authors could renew without the bur-
densome fees that they pay today, and if they could renew, not at
the risk of forgetting the 1 year, but having a much more flexible
system — or, as Mr. Pattison suggested, that there be notice to the
author — you may be able to work something out.
Mr. Kastenmeier. I yield to the gentleman from Massachusetts.
Mr. Drinan. Thank you very much, Mr. Chairman.
I will just make a couple of comments and maybe a question.
I feel a little bit like Dr. Kissinger trying to preside over two peo-
ple that cannot get together and negotiate. AH I can say is, you better
try harder. I am not saying who is at fault over the last 8 years in not
being able to negotiate and have some bill of rights, some means of
professional code. I will tell you what is likely to happen if the two
opposing parties that we have seen here this morning do not have
some rapprochement.
I have received alread}^ some 300 or 400 letters from educators and
librarians, and they are pouring in. And other Members of Congress
have received them, too. One Member, not a member of the Judiciary
Committee, said, "AYliat is this feud all about?" I told him, in brief,
what it is about. He said, "Weil, they are my educators and librarians;
I had better go with them."
If it comes to the floor and the posture is that, that might even
change, I do not know. In any event, it would be very helpful for the
committee — I am asking you to help us do our work^ — if somehow
some professional understanding could be arrived at in the immediate
future.
I have one simple question of anybody who would answer it.
Is there any analog in the copyright law of other nations for what
the educators are asking for ?
Mr. Karp. There are, in some countries, various types of exemp-
tions. I would not want to risk telling you precisely what they are,
but we can provide them. I am sure the educators will, too.
Mr. Drinan. I am sure it is a universal, worldwide problem, and I
am sure educators and librarians in other countries have other prob-
lems, and they have probably gone to rights. That would be very
informative to me.
I thank you very much for a very fine presentation.
364
Mr. IvASTBisTMEiER. The gentleman from New York.
Mr. Pattison. It appears to me that this limited exemption, the
fair use exemption, really arises — what you do not find a correlation
CO with other property rights. There is limited fair use exemption for
trespassers or a variety of other things. The reason that even arises is
because there was a problem of access, primarily. Unlike other prop-
erty that is tangible, you usually can hnd out who owns it ; it is there,
somewhere; but whereas, with copyright, sometimes you cannot. The
problem of access, I think, is a real problem. How do you find out,
fairly quickly, whether the author is still alive ? How do you find out,
fairly quickly, Avhether you can get permission ? Who do you write to
when you have a book that is published by someone other than Mac-
millan, some obscure publisher, and it just says Jones & Co., Dallas,
Tex.? How do you resolve those problems so we can get access as
quickly as possible ?
Mr. IVAjip. I would like to answer the question in two parts.
The fair use doctrine really arose because of the unique nature of
copyright. That is, it does not protect ideas ; it does not protect facts.
Therefore, others can freely use them. One of the great attributes of
copyright is that it is not a restnctive form of property. So much for
that aspect of it.
In answer to your question, this is one of the things that we pro-
pose to deal with in cooperation with the education community and
the library community, in terms of setting up what we call an informa-
tion or processing clearinghouse. It is not hard to find when an author
has died ; that is easier to find out than if the work is in copyright.
One of the great arguments made by the other side — and it is abso-
lutely without basis — is you can tell when a work is in copyright. I can
give you 10 examples of how difficult that is, and they are in the record
of prior hearings.
What you can do with a little help, if you do not know it, find out
quickly how to locate both the author and the publisher. For example,
most publishers are listed in Literary Marketplace, which is a book
published every year.
We have discussed setting up a clearinghouse that would field
questions just like that, and would set up a very simple permission
form which we asked everybody to work on, which would even deal
with permissions that would be given without fee.
Mr. Pattison. Is there any place, would there be any place in the
law for a sort of a good try exemption ?
Mr. Karp. I know what you mean.
Mr. Pattison. I want to quote from a book, I want to use a book ;
I cannot find that information out. I write some letters ; I make some
telephone calls; I cannot get any information and the time is going
by. I have to make my speech or whatever it is I have to do. Should
there be some kind of a time limit ? I cannot find out if the author is
alive or not. You cannot always find those things out.
Mr. Karp. I think you run into difficulty of proof, for one thing.
Mr. Patitson. As a defense, for instance.
Mr. Karp. Then you are getting back to the point you raised be-
fore, Mr. Pattison. IVlien you get deep down to the basis of copyright,
you are talking about certain fundamental rights — the Constitution
said exclusive rights, for that matter.
365
Mr. Pattison. It does not say exclusive unless the Congress wants
to jrive exclusive.
Mr. Karp. I am not arguing you cannot create exemptions. It has
been too niany years to stait that argument now. It still comes down
to the point, if it is not fair use, the author has the right to say yes
or no — I guess the right to be negligent, too. It does not happen all that
often. It would happen much less often if we sat down to work out a
very simple system of notification — not of notification, but arranging
for people to write to the places they should write or call the places
they should call.
Ms. Linden. First of all, right of access is created by publishing in
the first instance. The big question is right of additional access, piece-
meal, when and as you want it. The clearinghouse, as I said earlier,
we have offered to them since 1965. The concept of a penalty — in other
words, they can use it freely if they do not get a response quickly
enough — has inherent in it various problems. Not all copyrighted
work is of the same character, the same nature, the same usefulness.
Some scientific and teclinical treatises and major reference works are
under revision. We want to encourage revision, updating. We will not
have revision and updating unless the author and/or publisher is per-
mitted a period of time in which they say, no, you cannot disseminate
that particular article ; we are going to redo it. You run into all sorts
of philosophical and teclmical problems.
Mr. Pattison. I understand that, but when a person tries to get
access and camiot get access — maybe it does not happen that much —
but he makes the effort to get to the author, the owner of the copy-
right, and he is unable to do that. He makes a good faith effort,
et cetera. You have a bankrupt publisher
Mr. LiEB. May I answer that question, please ?
In the first place it is almost a moot question, if we are talking in
the context of educators who were here this morning, as distinguished
from other publishers or other authors who plan to be published. I do
not know of any instance, short of instances of actual piracy of
anthologies and collected works, where, for a particular classroom
use, a publisher or author has complained. He is kind of inured to
this. If it is transitory, if it happens once, he probably does not hear
about it. If it persists, there may be correspondence, and the school
will say, yes, we were wrong. I have had lots of correspondence with
school districts who say, yes, now we understand what you are talking
about.
But on permissions, The Publishers Association has recently cir-
culated this little pamphlet that I would like to offer, which is a guide
to get permission for noncommercial use.
As Mr. Karp said, we have been discussing recently, with those who
are willing to talk to us, of the possibility we might set up some sort
of copyright expediting clearance agency.
Mr. Pattison. There is no rule that you have to be a big publisher
to be in the publishing business. I can publish something. I can be-
come a publisher by using my typewriter, if I want to. I do not have
to be in business very long; I can move from here to California or
sometliing. No one can find me. That is why you simply caimot find
the publisher. You have no information on the document.
Mr. LiEB. I would like to make a horseback answer.
If whait you are talking of is an educator making an effort, when he
makes his teaching plan, to say 2 months from now, I will make 30
366
copies for my class of this poem that so-and-so wrote, that was pub-
lished by Jones in Dallas and he makes an effort to communicate witli
the publisher or the author and he cannot find them and he produces
his 30 copies for the use of the class 2 months hence — in the first place,,
like yesterday's snow, it will have disappeared. In the second place,
there is no one that I know of on the copyright-owning side who would
think it worthwhile to go to a lawyer and make a complaint against
a hypothetical misuse of copyright ; and if anyone were foolish enough,
it would seem to me, to attempt to make that a test case, I would think
it might very well be one of the elements of defense of fair use that
it never was made to obtain clearance and it was not possible to do so.
]Mr. Pattison. I have an information gap here.
When you talk about computers, input and output, could you run
through that in some way that I could understand it ? I just do not
understand it.
Mr. ZuRKOWSKi. I am not sure I can give you an explanation of
it in short order. In answer to your question, it is a position of our
industry that the cr-eation of a data base is a work of authorship. It in-
volves all the things that an author goes through in creating.
Mr. Pattison. What does a data base consist of ?
Mr. ZuRKOwsKi. A data base can take unj embodiment. The En-
cyclopaedia Britannica could be considered a data base. It is a collec-
tion of separate pieces of information tliat are organized so as to be re-
trievable. You can do that in micro fihn. You can do that in a com-
jmterized data base. For example if you keypunch CA^ery word in tlie
Encyclopaedia Britannica and converted the keypunch cards to mag-
netic tape, you would have a machine-readable data base. Doing tliat
is what the educators are talking about. They want to be able to make
an input copy of the Encyclopaedia Britannica to their data base free
of copyright infringement.
I must say that the real basis of our objection is that educational
university computer centers are serving a wide range of users, in
addition to the educational community. Once this major investment
is made in creating that data base, they are under pressure to find as
many uses as possible.
We ask the committee not to grant such a broad exemption because
it will destroy the ability of the industry which is accommodating
author's right in marketing such products. We think that before such
an amendment is considered, the committee should either hold more
hearings on this, to be better informed on the subject, or defer the
question to the National Commission.
We did submit a lengthy set of amendments in our long statement
which illustrate the detailed questions that are involved, and they
are just another set of questions just like these you have been hearing
for the past 2 days.
The point of our testimony was in effect that the committee really
has not considered these aspects and has not taken testimony from peo-
ple who create data bases and market data bases. It is a whole other
world. The purpose of section 117 in the legislation was to preserve the
status quo on those questions — simply by virtue of the fact that the
committee did not have enough information. We face in the educator's
ad hoc proposed amendment, a proposal to exempt input. I am just
trying to call to the attention of the committee that before you get
into that, you have to consider all the experience that has been had on
367
that. It would be better if you reserved that for the National Com-
mission's study, or hold another day of hearings on that subject.
That is the position of our statement.
Mr. LiEB. Congressman Pattison, the approach of 2223 is to leave
the law, whatever it is with respect to computer usage, as it is and
ask to turn the question over to the new National Commission.
Ms. Linden. I would like to add a couple of words, if I may.
I was on the Committee of Science and Technology. Executive Of-
fice of the White House, for 31/0 years. We debated this issue and we
prepared voluminous reports on exactly this problem. The fact is
that the cost in time, energy, and money, the millions and millions of
dollars it costs to create input, to create the storage and the memory
core of the computerized information storage and retrieval system, is
such that if we, in the interim, prior to the resolution of the problem
by the National Commission, permit free input, the cost of revert-
ing to the old system and protecting input, I submit, will, for practical
purposes and realistically, be impossible. Once you free the geese, they
fly away. It is impossible to recapture them again.
This is a short- form urging of what is an extremely complex concept
of computerized uses and processing of information.
One of the basic issues which this committee has not averted
to — and rightly so, because it is being left to the National Commis-
sion— is the problem of censorship. I would simj^ly whet your ap-
petite by using that word. The serious problem in censorship that
computerized informntion storage and retrieval systems would cause
if input were left, as I say, as the freed geese. This is a subject that
warrants not only the attention of this committee, l^ut serious study
of the National Commission and careful reporting back for your con-
sideration.
]\Ir. Kastenmeier. On behalf of the committee. I thank you for
your appearance this morning — I should now say this afternoon. We
will see you again in the context of this particular issue, i:>erhaps. or
others, on June 4: the committee will be exposed to the jukebox issue
and the tribunal issue. And we will have as witnesses the American
Society of Composers, Authors & Publishers; Broadcast Music, Inc.;
Music Operators of America; and the manufacturers of jukelioxes.
Until that time, on June 4, at 10 o'clock in the morning, the sub-
committee stands adjourned.
rWhereupon, at 1 :30 p.m., tlie subcommittee adjourned.l
[The following statements were received for the record.]
Statement op Albert Warren, Chairman, Copyright Committee, Independent
Newsletter Association
My name is Albert Warren. I am chairman of the Copyright Committee of the
Independent Newsletter Association. I am publisher of Television Digest with
Consumer Electronics. The other members of the Committee are Louis Rothschild,
publisher of Food Chemical News, and David Swit, publisher of Product Safety
Letter. All 3 newsletters are published in Washington.
We speak for newsletters which are true journalistic enterpri.ses. We do not
represent house organs, publicity devices and the like. We produce the publica-
tions of the type admitted to the Congressional Periodical Press Galleries under
the rules of Congress which specify that the publications admitted are "published
for profit and supported chiefly by advertising or by subscription, and owmed and
operated independently of any industry, business, association, or institution."
The newsletter industry is uniquely vulnerable to violations of copyright for
the following reasons :
368
( i ) The typical newsletter is very brief — comprising a few pages, often no more
than 4 — -and is therefore susceptible to quick photocopying in its entirety.
(2) Since newsletters' income almost always comes from subscriptions alone,
illegal reproduction and distribution have an immediate and devastating impact
on the market for the publications.
(3) Newsletter publishing is small business in its truest sense. With very few
exceptions, each of the thousands of newsletters published in the United States is
the product of a few journalists — frequently only one — often assisted only by
their families.
,(4) A recent survey of the newsletter industry shows that 19% have 500 or
fewer subscribers: 21.5%, 501-1,000; 21.5%, 1.001-2000; 28%, 2,001-5,000;
10%, more than 5,000. With the average subscription running about $50 yearly,
it is starkly evident that the revenues of a typical newsletter constitute small
business indeed.
Simple arithmetic demonstrates dramatically the drastic impact that even a
limited amount of copying may have on the viability of a newsletter. A news-
letter with 500 subscribers, charging $50 a year, has a gross revenue of $25,000.
If illegal copying depi'ives the publisher of a mere 100 subscribers, he suffers a
loss of $5,000—20% of his income.
Newsletter publishers simply do not have the economic strength to police and
litigate violations of their copyrights. Indeed, many publishers do not even file
their newsletters with the Register of Copyrights, believing that the cost of $300
per year isn't justified by the insignificant amount of protection provided under
current law.
We recognize that no Act of Congress can provide complete and automatic
freedom from jeopardy. However, we do believe that Congress can make it
abundantly clear what constitutes a violation of our rights — so that we can
quickly, without expensive and protracted litigation, prosecute violations when
we discover them.
We believe that the intent of Congress in providing for "fair use" is eminently
laudable. Our concern is that newsletters are peculiarly vulnerable to abuses of
"fair use." The reproduction of even a single page of a newsletter — or frequent
reproduction of even mere sentences or paragraphs on specific topics — can often
provide a businessman with all he needs without cost, thus eliminating him as a
source of revenue. In fact, many newsletters conduct surveys and analyses which
result in a single critical number. The illegal copying of this single number can
deprive the publisher of major revenues. For example, my own publication con-
ducts a monthly survey of hundreds of retailers to determine sales of TV re-
ceivers and stereo instruments to the public ; the results are shown in a brief
tabulation. The theft of this tabulation or even a portion of it would vitiate the
entire enterprise.
We recommend, therefoi'e :
(1) Exclusion of newsletters from any "fair use" reproduction as provided in
Sec. 107. However, since most of our subscribers are businessmen — and we
have no desire to exclude students from access to our material — we believe
that not-for-profit libraries should be allowed "fair use." We believe that cor-
porate and other business-operated libraries should be excluded.
(2) Should your Committee conclude that no "fair use" exclusion be made
for newsletters, we urge that copying of any portion of a newsletter be allowed
only upon written permission of the publisher. Historicall.v, most newsletter
publishers are pleased to authorize such reproduction on an occasional basis.
(3) If your Committee finds neither of the foregoing warranted, we ux'ge, at a
minimum, that language such as the following be included, in referring to "fair
rise" : "For newslettei's, fair use shall include reproduction of 50% of any
article or 150 words, whichever is less. Each tabulation or graph shall be con-
sidere<l a separate article. Persons reproducing portions of a newsletter, under
this provision, shall furnish the publisher with copies of such reproductions. On
request of the publisher, such person shall provide him with the names, aflfilia-
tions, and addresses of the persons to whom such copies were distributed."
We suggest that, under "Definitions," the following appear :
"A 'Newsletter' is a periodical published for profit and supported chiefly by
subscription, and owned and operated independently of any industr.v, business,
association, or institution."
In addition, we suggest that the provisions covering newsletters, regarding
"fair use," be incorporated in a new Sec. 118.
369
Statement of F. J. VanAntwerpex, Executive Secretary, American Institute
OF Chemical Engineers, and President, Council of Engineering and Scien-
tific Society Executives, and Albert Batkin. Chairman of Committee on
Publications, Council of Engineering and Scientific Society Bxecutr-es
Mr. Chairman : My name is F. J. VanAntwerpen, Executive Secretary of ttie
American Institute of Chemical Engineers, and President of the Council of
Engineering and Scientific Society Executives. This Council is composed of the
leaders of 80 national engineering and scientific societies and numerous similar
local and Canadian organizations. In the United States alone, the cumulative
society membership exceeds one million engineers and scientists.
The membership of these societies constitutes not only the users of the material
disseminated but are, in fact, the authors. Therefore, they have a vital interest
in the use and misuse of their material. The Council acting on behalf of the mem-
ber societies and their membership in turn ask tiiat you consider this in your
deliberations. We feel that the provisions incorporated in the bill as passed by the
Senate last year are equitable, although not as strong as some Societies may
wish. We can live with it.
I have with me my associate, Albert Batik, Deputy Managing Director of the
American Society for Testing and Materials, and Chairman for the Committee
on Publications of our Council, who can give you additional information on our
position.
Mr. Chairman : To give the Committee some perspective, I have data that may
be useful. Of all the original scientific and engineering information published in
the United States between 70 and 75% is published through the non-profit engi-
neering and scientific societies.
These Societies depend on the income derived from the subscriptions and sale
of their publications in varying degrees ranging from 20 to 80% of their total
income. Most of the income is plowed back into a continuing information dissemi-
nation program. Virtually all the Societies work essentially on a break-even
basis. Therefore, they have a vital interest in copyright legislation which will
affect their income.
We recognize the position of libraries and other information centers that have
limited budgets. However, faced with rising costs, and losing subscriptions to
the copy machines, the societies find themselves in a rather awkward position.
Subscription prices can be raised but this serves only to aggravate the situa-
tion and drives more subscribers to the copy machine. Keep in mind that the
only beneficiaries in this troubled triangle are the manufacturers of the reproduc-
ing etiuipment. The true cost of this equipment is rarely recorded by the libraries
and information centers, and the societies find their investments used free of
charge to create income for a third party.
Societies can publish less. This would hinder the technical development of
answers to the urgent problems facing the United States such as : solutions to
the energy crisis, the abatement of pollution, and the delivery of adequate health
services. The societies have a moral and ethical commitment to use their facilities
to assist the nation in meeting its goals.
Societies can ask the Federal Government for subsidies to operate their publica-
tions and to make up for the loss of subscriptions. However, it is a well known
fact that he who pays the piper calls the tune. In the technical field, vigorous
debate and controversial positions are the keystone to arriving at adequate
answers. A controlled technical press would be as regressive as a controlled
social science press or a controlled news press. A number of other countries, at
one time or another, have controlled their technical press much to their own detri-
ment. Dissent in the technical sphere is essential, otherwise we would still be
navigating on a flat world.
Tlie Senate in the report accompanying the bill which was passed last year
urged publishers and users to develop a system of reasonable royalties. I person-
ally have participated in these negotiations and believe that a workable solution
can be developed provided that no further exemptions be granted to users. As Mr.
VanAntwerpen has stated, the Senate bill is livable and as is mandated in the
accompanying report, a workable solution can go far to solving the problem at
hand.
370
Statement of David McCurrach on Behalf of the National School and
Equipment Association
Mr. Chairman and members of the subcommittee, my name is David McCurrach,
and I am Executive Vice President of the National School Supply and Equip-
ment Association (NSSEA), 1500 Wilson Boulevard, Arlington, Virginia. Our
membership is comprised of upwards of 470 companies which are involved in
manufacturing and distributing supplies and equipment to schools all across
the United States.
One of the significant contributions which we make to the educational process
is in the area of instructional materials. Instructional materials include a wide
variety of nontext supplemental aids to teaching which range from printed
materials such as workbooks, exercises, flashcards and learning cards of all
types, to newer audio-visual materials such as transparencies for projection,
films, and learning records. The development of these new materials has
made it possible for teachers to make learning more varied, more interesting,
and more effective.
Because of the great importance of copyright protection, we have viewed with
interest and concern the efforts of Congress over the last ten years to revise the
1909 Copyright Law to reflect new technologies and developments. Since in-
structional materials are designed for use in the classroom, there ai'e substantial
research and development costs in addition to the standard costs of publication.
There woidd have been little incentive for the creators of instructional materials
to devote the requisite time, money and effort to this undertaking, had there
lieen no restrictions on the right of teachers and school oflScials to duplicate
instructional materials once they were published.
The advent of photocopying, however, has undermined the efBcacy of the copy-
right protection provided by law. The duplication of educational and instruc-
tional materials occurs regularly on a large scale. In fact, many school officials
and teachers believe that all such copying is legal because it has been done so
consistently over such a long period of time. The practical prohlems in trying
to monitor this .activity combined with the lack of judicial guidelines in the
area have made the enforcement of rights under the current law extremely
difficult.
The futui-e development and availability of these materials depends, in the
large part, on the re-establishment and maintenance of adequate copyright
protection. The interests of the people in the availability and wide dissemina-
tion of original works of authorship can best be assured where the author is
reasonably compensated for his work. A recognition of this fact underlies copy-
right law. Without a clear statement of legislative policy on the right of the
public to duplicate, the incentive to create instructional materials will disappear.
Two provisions of the pending Copyright Revision Bill (H.R. 2223) are of
greatest concern to NSSEA. Section 107 permits the duplication of copyrighted
materials where it constitutes a "fair use" of the work. Section 110 exempts
from copyright liability certain performances and "displays" of copyrighted
material in teaching contexts.
It is our understanding that § 107 is not intended to change existing law. To
the extent that this provision simply codifies standards which have been devel-
oped Viy the courts to determine what is a "fair use" of copyrighted materials,
NSSEA would have no concern. We oppose, however, the pending amendments
to H.R. 2223 which would broaden the scope of "fair use" and. in particular, the
proposal which would exempt from liability for copyright infringement virtually
all duplication of copyrighted materials used for nonprofit teaching purposes.
Such a change in copyright protection would, we believe, threaten tlie future
of instructional materials. Since schools are the only purchasers of instructional
materials, large-scale duplication by schools would deprive the creators of those
materials of the only market available to them. In the past. Congress has con-
sistently refused to insulate educators from the obligation to pay royalties for
duplicating copyrighted materials. NSSEA urges, Mr. Chairman, that you and
the members of your Subcommittee not so insulate them now.
I would also like to take this opportunity to address my remarks to what
may be some real problems in the bill as it is currently drafted. With reference
to the section governing the "fair u.se" of copyright materials (§ 107), NSSEA is
concerned that it will not adequately clarify the respective rights of creators
and users in instructional materials. The standards set out in § 307 itself are
extremely vague. Without further explanation, no teacher or school official would
371
be able to determine whether or not a given duplicating project would be
permissible.
First, NSSEA believes that it is essential that explicit guidance be provided
on what constitutes "fair use" with respect to the duplication of instructional
materials. Guidelines which have been devised with printed textual materials
in mind will not resolve the problem of instructional materials. Unlike textbooks,
most instructional materials are designed expressly to be used in segments which
rt late to specific areas of study. For this reason, duplication of portions of an
instructional material program is far more detrimental to the rights of their
creators than comparable duplication of a portion of a textbook would be. We
urge, therefore, that copying even small segments of such materials be deemed
not to constitute a "fair use".
Secondly, the application of the doctrine of "fair use" to what have been
termed "consumables" must be clarified. Unlike textbooks, many printed instruc-
tional materials, like workbooks and exercises, are consumed in use. Recognizing
the particular problems raised by these materials. Congressional committees have
consistently made clear that the privilege of "fair use" by teachers and students
would have "little, if any, application" to "consumables".^ A spokesman for the
Ad Hoc Committee on Copyright Law Revision of the American Council on
Education testified before this Committee that they were not asking for the right
to reproduce writings that are destroyed in use. Supporting the virtual unanimity
among Congressional committees, the educational community and the creators
of instructional materials that duplication of instructional materials which are
consumed in the classroom should not be permitted, NSSEA recommends that
§ 107 be amended accordingly.
Specific guidance is also needed on the application of § 107 to audio-visual
materials. Due to the nature of audio-visual aids, no more than one set of a
program is usually needed in any one classroom. And, often, a school will pur-
chase only one of each program or set which will be rotated among the class-
rooms. Thus, even single duplications of tliese materials could have a significantly
adverse impact on the audio-visual industry. NSSEA urges this committee to
clarify § 107 and to set out express restrictions on the rights of educators to
duplicate audio-visual materials.
The other section of H.R. 2223 which NSSEA finds particularly troubling is
§ 110. which exempts from liability certain displays of copyrighted materials in
a teaching context. § 110(1) provides that the "display" of a copyrighted work in
the course of "face-to-face teaching activities" in a classroom by teachers or
pupils is not an infringement of copyright — and to "display" a work is defined as
"to show a copy of it". Except for motion pictures and other "audio-visual" works,
there is no requirement in the bill that such copy must be lawfully made in the
first place. NSSEA believes that this provision is inconsistent with § 107 and
could permit wholesale infringements of instructional material copyrights. Once
the copy has been made of materials like sets of learning cards or .slides, this
exemption could allow teachers to use that copy freely thereafter without run-
ning any risk of copyright infringement. NSSEA believes that § 110 should be
amended to restrict all the rights of "display" granted under this provision to
copies which were lawfully made in the first instance. Clearly, your legislation
should not create the circumstances whereby one section of the law permits peo-
ple to do indirectly what another section forbids them to do directly.
In conclusion, Mr. Chairman, NSSEA commends the efforts of this committee
to revise our existing copyright laws and to resolve the problems created by the
rapid technological changes of the last few decades. The question of photocopying
is clearly one of the most troublesome now facing your committee. The interests
of educators and users, however, would be best protected in the long run by the
maintenance of copyright protection which is sufficient to encourage and reward
the further development of new educational methods and instructional materials.
IS. Rep. No. 93-983. 93rrt Cong., 2d Sess., at p. 117 (1974) ; H.R. Rep. No. S3, 90th
Cong., 1st Sess., at p. 34 (1967).
COPYRIGHT LAW REVISION
TUESDAY, JUNE 3, 1975
House of REPRESENTATI^^s
Subcommittee on Courts, Civil Liberties,
AND the AoMINISTRiVTION OF JuSTICE
OF THE Committee on the Judiciary,
Washington^ D.C.
The subcommittee met, pursuant to call, at 10 :10 a.m., in room 2226,
Eayburn House Office Building, Hon. Robert W. Kastenmeier [chair-
man of the subcommittee] , presiding.
Present : Representatives Kastenmeier, Danielson, Drinan, Pattison,
Mann, and Mazzoli.
Also present : Herbert Fuchs and Bruce A. Lehman, counsels ; and
Thomas E. Mooney, associate counsel.
Mr. Kastenmeier. The subcommittee will come to order.
We are meeting again this morning to continue our study of the
general revision of copyright law. This morning we have witnesses
representing varying interests on the question of performance rights
in jukebox performances. This is a question that 10 yeare ago, when
this subcommittee held hearings, was, as I would observe, somewhat
more controversial than it is today. Since then there hav^e been agree-
ments and accommodations, and while the parties are not precisely in
agreement on the issue in all aspects, the differences are less grave.
The committee policy in this set of hearings has been to call, as the
first group of witnesses, those witnesses Avhich have what appear to
be a disagreement with the bill as introduced; that is to say, the
bill as it passed the Senate late last year. In this case, it is not the
proprietors of music, music composition, that are defending the bill in
all particulars. Actually the performance rights societies have some
disagreements with the bill as it passed, and consequently our first
set of witnesses this morning represent the performance rights socie-
ties. They are a number of distinguished individuals. Ten years ago
there were a different cast of people present. In addition to the gen-
eral counsel of the American Society of Composers, Authors and
Publishers, Mr. Bernard Korman, and the general counsel of Broad-
cast Music Inc., Mr. Chapin, and also counsel of SESAC, Inc., who
will be a witness, Mr. Ciancimino, who was present 10 years ago, there
are a number of distinguished American authors and composers.
And first, if it is the pleasure of the panel before us, I would call on
the great name in American music, the distinguished author, and com-
poser, Aaron Copland, to l^e followed by the others as may be present.
I notice we have Mr. Sy Oliver. Chip Davis and others may be here,
and perhaps I should call on either yo\i, Mr. Korman, or someone else
who is appropriate to introduce each of the witnesses.
(373)
374
But, first the Chair would like to greet and call on Mr. Copland
to make his presentation.
TESTIMONY OF AAEON COPLAND, COMPOSER AND AUTHOU, AC-
COMPANIED BY BERNARD KORMAN, GENERAL COUNSEL, AMER-
ICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS
Mr. KoRMAX. Mr. Chairman, if I may, since you mentioned that
there would be other witnesses, and Ave had listed Johhny Mercer as
one of them, Mr. Mercer had intended to be here. His wife is recover-
ing from an operation and she is out in California, and he is with
her, and therefore, unfortunately not here.
We have arranged among ourselves a little different allotment of
time than appears on your schedule. Sesac has graciously ceded 2
minutes of its time to us, and rather than Mr. Copland taking only
5 minutes, he w^ill take 8 or 9, and I will try to briefly summarize the
statement that Mr. Mercer would have made had he been here.
Mr. Kastenmeier. And who will speak for Broadcast Music Inc.,
Mr. Sy Oliver?
Mr. Chapix. Mr. Chairman, Mr. Sy Oliver is here and will speak
for Broadcast Music Inc. The other person, Mr. Frank Peewee King,
has been delayed in transit, and we expect him at any moment. I
would hope at your pleasure that he could be at the end. Somebody is
at the airport waiting for him and he will bring him here just as
soon as he arrives.
Mr. Kastenmeier. In which case we will call on you, Aaron Cop-
land.
Mr. Copland. Mr. Chairman and members of the committee. My
name is Aaron Copland, and I reside in Peekskill, N. Y.
I appear today as a spokesman for the 23,000 members of the Amer-
ican Society of Composers, Authors and Publishers, on whose board of
directors I have served since 1973. However, I believe I speak for
all composers, authors, and publishers of music, and indeed, that the
point of view I shall express is, in fact, the point of view of everyone
who has looked at the jukebox question, with the sole exception, of
course, of the jukebox industry.
First, Mr. Chairman, I would like to express my personal apprecia-
tion of your extraordinary efforts on behalf of authors and com-
posers over the past dozen years. I believe all creators owe you a
large debt.
I hope my statement will accomplish two things: First, to state
succinctly ASCAP's position on the jukebox issue and, second, to set
forth briefly some facts about the world of music which are not
generally known.
The origin of the $8 per year provision in the present bill is well-
known. In 1967, for the first time, the prospects for enactment of a
general copyright revision bill were good, but there were two prob-
lems— the fee to be paid for jukebox performances and how cable tele-
vision should be treated. To resolve the juke])ox issue, we and other
licensing organizations agreed with the jukebox industry that their
fee would be $8 per box per year — substantially less than the $19 io
$20 fee recommended by this subcommittee in 1966.
375
The bill, as so amended, passed the House — with the cable television
provisions deleted — but the Senate failed to act. The $8 fee for the
500,000 jukeboxes then in use would have produced $4: million per
year in license fees. That is a total of $28 million for the period li)68
through 1974. Because the bill was not enacted, not a penny has been
paid for performance fees.
Your bill, Mr. Chairman, is the same as the bill passed by the
Senate in September 1974. As a result of a last-minute amendment
on the Senate floor, chapter 8 was changed so that the $8 fee would
not be subject to periodic review and adjustment by the Copyright
Eoyalty Tribunal.
ASCAP's position, then, is that we support H.K. 2223 with a single
change : we urge that chapter 8 be amended and restored to tlie form
in which it won Senate Judiciary Committee approval. The jukebox
fee should not be frozen by statute. It should be treated the same as the
other statutory fees — the mechanical fee, section 115; and the cable
television fee, section 111. Congress is too busy to be burdened with
periodic review and adjustment of copyright royalty rates as eco-
nomic conditions change. Such adjustments are best left to the Copy-
right Eoyalty Tribunal.
Mr. Chairman, it would not surprise or disappoint me if, when my
name was listed as a witness on this issue, you and the other members
of the committee were puzzled as to why my fellow composers would
call on me, or why I would agree, to speak for them when I am
better known to concert audiences than to those who drop their quar-
ters, half-dollars and, I am told, even their dollar bills, into jukeboxes.
The answer is that the world of serious music is much closer to, and
more dependent on, the world of popular music than is generally
realized. To appreciate why this is so — and how "serious" composers
stand to share in royalties paid by jukebox operators — it is necessary
to understand how ASCAP and similar licensing organizations
function.
ASCAP licenses are valuable to users precisely because they cover
many compositions — the works of all of ASCAP's members and the
works of tens of thousands of music creators who belong to similar
forei.n;n societies with which ASCAP is affiliated in all parts of the
world.
ASCAP members include composers of serious music, rock n' roll,
the great American standards, music from Broadway shows, film
music, religious music, jazz, country and western; indeed, all music.
xlSCAP is not a corporation. We are an unincorporated, nonprofit
membership association — really, a kind of cooperative,
]Many of us who create music rely primarily on our copyright royal-
ties for our livelihood. In addition to our performance royalties, we
also receive record royalties. But it is important for you to realize that
record sales benefit record companies and performers more than they
benefit writers and publishers. Consider the mechanical royalty income
earned by writers and publishers from a record that sells 1 million
copies — there are not many — and remember that at the present maxi-
mum statutory fee of 2 cents per record, tlie publisher would receive
$10,000 and $10,000 would be divided among the writers.
376
Other sources of income for composers, such as sheet music, are
smalL The fact is that careers in music would often be impossible with-
out performance royalties. They are the mainstay for many composers.
In deciding how to apportion the writers' share of ASCAP's rev-
enues, the most successful popular writers do something unique as
far as I know — they encourage the development of other writers by
a distribution system which channels money from those who earn
most to those who earn less.
Specifically, the 100 or so writers who receive the most "performance
credits" in the ASCAP survey of performances receive less than the
amount they would receive if they were paid on the same basis as
all other writers. These sums "flow down" to writers whose works do
not enjoy equal commercial success.
Money, after all, is the essential encouragement one must have. It
permits the writer, especially the beginner, to keep writing when,
otherwise, he might have to give up his profession.
ASCAP's members have agreed to distribute 10 times as much to
writers and publishers of serious music as this music earns from licens-
ing performances in concerts and recitals. The money used for this
purpose obviously comes from ASCAP's other licensees. These include
"general" licensees, such as restaurants, hotels, and taverns, and would
include receipts from jukebox operators. Accordingly, the fc^s ASCAP
would receive for jukebox performances under the general revision
bill are of vital interest to me and to other serious composers.
And there are other reasons. There is the international aspect — we
Americans receive far more for foreign performances of our works
than we pay to foreign creators for American performances. Jukebox
performances abroad earn money for our composers; why should we
do less for theirs?
AVliy, indeed, should we be parsimonious toward our creators in any
aspect of our copyright law? As one who has devoted his life to
the creation of music, I am deeply concerned about the term of copy-
riglit protection. I am told that some witnesses have appeared before
this committee to argue against the term of life ]~)lus .50 years which
you have proposed, INIr. Chairman, in your bill, and which is consistent
with the terms in virtually all civilized countries.
My own first work was publislied in 1921. In the absence of enact-
ment of this bill, or of a further extension bill, this work of mine will
go into the public domain in the Ignited States in 1977. Elsewhere in
the world, its copyright term will run at least 50 years after my
death. I submit that the United States should protect works of author-
shin at least as long as most other nations.
Mr. Chairman and members of the committee, the achievements of
Americans in literature, painting, and music are measures of the great-
ness of our Xation. They are honored around the world and we can
all be proud of them.
You have a rare opportunity : Most people are not in a position
to offer more than lip service to the Nation's creators, men and women
in every State, large and small. On this eve of our Piicentennial you
can carry out the intention of the f ramers of our Constitution. In con-
sidering each of the sohitions to the complex issues confronting you,
the questions I should like you to repeat to yourself are: Is it fair to
authors? Does it, in fact, carry out the famous constitutional mandate
377
"To promote the progress of science and useful arts, by securing for
limited times to authors and inventors the exclusive right to their
respective writings and discoveries?"
Thank you.
[The prepared statement of Mr. Copland follows :]
Statement of Aakon Copland, Composer, Made on Behalf of the American
Society of Composers, Authors, and Publishers
Mr. Chairman and members of the committee. My name is Aaron Copland, and
I reside in Peekskill, New York.
I am a composer, author, conductor, and teacher and a member of the National
Institute of Arts and Letters and the American Academy of Arts and Letters.
I appear today as a spokesman for the 23,000 members of the American Society
of Composers, Authors and Publishers, on whose Board of Directors I have served
since 1973. However, I believe I speak for all composers, authors, and publishers
of music and, indeed, that the point of view I shall express is, in fact, the point
of view of everyone who has looked at the iuke box question, with the sole excep-
tion, of course, of the juke box industry.
First, Mr. Chairman, I would like to express my personal appreciation of your
extraordinary efforts on behalf of authors and composers over the past dozen
years. I believe all creators owe you a large debt.
I hoi)e my statement will accomplish two things : first, to state succinctly
ASCAP's position on the juke box issue and, second, to set forth briefly some
facts about the world of music which are not generally known.
For many years ASCAP and other organizations representing comi)osers sought
a change in the 1909 copyright law so that royalties would be earned when the
public paid to hear our music played on juke boxes. Fortunately, we no longer
have to concern ourselves with the basic question in dispute over those many
years — whether juke box operators should pay any performance fees. They now
agree to pay $8 per year per juke box.
Thus, the only question now is whether the $8 fee should be frozen by statute
or subject to periodic review and adjustment, up or down, as the facts may
warrant. Last year the Senate Judiciary Committee recommended such review
by the Copyright Royalty Tribunal, subject to veto by either House of Congress.
We favor that approach.
The origin of the $8 per year provision in the present bill is well-known. In
1967, for the first time, the prospects for enactment of a general Copyright Re-
vision Bill were good, but there were two problems — ^the fee to be paid for juke
box performances and how cable television should be treated. To resolve the
juke box issue, we and other licensing organizations agreed with the juke box
industry that their fee would be $8 per box per year — substantially less than the
$19 to $20 fee recommended by this Subcommittee in 1966.
The bill, as so amended, passed the House — with the cable television provisions
deleted — but the Senate failed to act. The $8 fee for the 500,000 juke boxes then
in use would have produced $4 million per year in license fees. That's a total
of $28 million for the period 1968 through 1974. Because the bill was not enacted,
not a penny has been paid for performance fees.
Your bill, Mr. Chairman, is the same as the bill passed by the Senate in Sep-
tember, 1974. As a result of a last-minute amendment on the Senate floor, the
juke box provision (§ 116) was changed so that the $8 fee would not be subject
to periodic review and adjustment by the Copyright Royalty Tribunal.
ASCAP's position, then, is that we support H.R. 2223 with a single change : we
urge that § 116 be amended and restored to the form in which it won Senate
Judiciary Committee approval. The juke box fee should not be frozen by statute.
It should be treated the same as the other statutory fees — the mechanical fee
(§ 115) and the cable television fee (§ 111). Congress is too busy to be burdened
with periodic review and adjustment of copyright royalty rates as economic
conditions change. Such adjustments are best left to the Copyright Royalty
Tribunal.
Mr. Chairman, it would not surprise or disappoint me if, when my name was
listed as a witness on this issue, you and the other members of the committee
were puzzled as to why my fellow composers would call on me, or why I would
agree, to speak for them when I am better known to concert audiences than to
57-786 O - 76 - pt. 1 - 25
378
those who drop their quarters, half-dollars and, I am told, even their dollar
bills, into juke boxes.
The answer is that the world of serious music is much closer to, and more
dependent on, the world of popular music than is generally realized. To ap-
preciate why this is so — and how "serious" composers stand to share in royalties
paid by juke box operators — it is necessary to understand how ASCAP and simi-
lar licensing organizations function.
We must start with the reason for ASCAP's existence. Since 1914 ASCAP
has provided an essential public service. It is a clearinghouse through which
composers, authors and publishers, and users of copyrighted music, come together
to issue or to obtain licenses for performance of music. ASCAP provides the
mechanism through which performance rights can be marketed in bulk at
enormous savings over the costs that individual negotiations would necessarily
entail.
ASCAP's members grant the Society the nonexclusive right to license their
works to all who perform them publicly for profit. ASCAP's licensing arrange-
ments now extend to over 35,000 users of music, ranging from the tavern owner
who may use records, tapes, a single instrumentalist or an orchestra, to the
three television networks.
To ensure that the various license fees are fair, ASCAP has voluntarily
entered into a Consent Judgment in United States v. ASCAP (Civ. 13-95,
March 14, 1950, S.D.N.Y.), which provides for judicial determination of a
reasonable license fee if ASCAP and any user fail to reach agreement. Our
counsel, Mr. Bernard Korman, can give you details on how this provision has
worked over the past twenty -five years.
ASCAP licenses are valuable to users precisely because they cover many com-
positions— the works of all of ASCAP's members and the works of tens of thou-
sands of music creators who belong to similar foreign societies with which
ASCAP is affiliated in all parts of the world.
ASCAP members include composers of serious music, rock n' roll, the great
American standards, music from Broadway shows, film music, religious music,
jazz, country and western — indeed, all music.
The wide diversity of ASCAP membership is reflected not only in the different
types of music, but also in the different degrees of achievement : membership
is open to any writer who has had one composition published or recorded, and
to any publisher who assumes the normal financial risk of the business. Accord-
ingly, the membership includes the most commercially successful, those who have
only one or two successful works over their lifetimes, and those who never write
a single successful work. The publishers, too, range from the most successful to
the struggling operation which may never show a profit.
ASCAP is not a corporation. We are an unincorporated, nonprofit membership
association — really, a kind of cooperative. After operating expenses are deducted,
amounts are set aside for foreign societies to pay their members. All remaining
revenues are distributed to the members, 50% to the writers and 50% to the
publishers. The distributions are based on an objective survey of performances.
Again, our Counsel can explain this distribution system in more detail if you
wish.
Many of us who create music rely primarily on our copyright royalties for our
livelihood. In addition to our performance royalties, we also receive record
royalties. But it is important for you to realize that record sales benefit record
companies and performers more than they benefit writers and publishers. Con-
sider the mechanical royalty income earned by writers and publishers from a
record that sells one million copies — ^there are not many — and remember that at
the present maximum statutory fee of 24 per record, the publisher would receive
$10,000 and $10,000 would be divided among the writers.
Other sources of income for composers, such as sheet music, are small. The fact
is that careers in music would often be impossible without performance royalties.
They are the mainstay for many composers.
I have mentioned the many different kinds of music in the ASCAP repertory.
The Society has a complex distribution system whose purpose is to reward each
member fairly for the contribution his works make to the repertory.
In deciding how to apportion the writers' share of ASCAP's revenues, the most
successful popular writers do something unique as far as I know — they encourage
the development of other writers by a distribution system which channels money
from those who earn most to those who earn less.
Specifically, the one himdred or so writers who receive the most "performance
credits" in the ASCAP survey of performances receive less than the amount they
379
would receive if they were paid on the same basis as all other writers. These
sums "flow down" to writers whose works do not enjoy equal commercial success.
Money, after all, is the essential encouragement one must have. It permits the
writer, especially the beginner, to keep writing when, otherwise, he might have
to give up his profession.
ASCAP's writers also set aside up to 5% of their share for special awards to
writers whose works have unique prestige value for which adequate compensa-
tion would not otherwise be received. These awards are made by special panels
consisting of nonmembers who are music experts.
I have mentioned some aspects of the ASCAP distribution system which pro-
mote and encourage authorship. Writers of popular music have also decided that
it is important to encourage writers in my area, usually spoken of as classical
or serious music.
ASCAP's members have agreed to distribute ten times as much to writers and
publishers of serious music as this music earns from licensing performances in
concerts and recitals. The money used for this purpose obviously comes from
ASCAP's other licensees. These include "general" licensees, such as restaurants,
hotels and taverns, and would include receipts from juke box operators. Accord-
ingly, the fees ASCAP would receive for juke box performances under the general
revision bill are of vital interest to me and to other serious composers.
And there are other reasons. There is the international aspect — we Americans
receive far more for foreign performances of our works than we pay to foreign
creators for American performances. Juke box performances abroad earn money
for our composers; why should we do less for theirs?
Why, indeed, should we be parsimonious toward our creators in any aspect
of our copyright law? As one who has devoted his life to the creation of music,
I am deeply concerned about the term of copyright protection. I am told that
some witnesses have appeared before this Committee to argue against the term
of life plus 50 years which you have proposed, Mr. Chairman, in your bill, and
which is consistent with the terms in virtually all civilized countries.
My first work was published in 1921. In the absence of enactment of this
bill, or of a further extension bill, this work will go into the public domain in
the United States in 1977. Elsewhere in the world, its copyright term will run
at least 50 years after my death. I submit that the United States should protect
works of authorship at least as long as most other nations.
Mr. Chairman and Members of the Committee, the achievements of Americans
in literature, painting and music are measures of the greatness of our nation.
They are honored around the world and we can all be proud of them.
You have a rare opportunity : Most people are not in a position to offer more
than lip service to the nation's creators, men and women in every state, large
and small. On this eve of our bicentennial you can carry out the intention of the
framers of our Constitution. In considering each of the solutions to the complex
issues confronting you, the questions I should like you to repeat to yourself
are: Is it fair to authors? Does it, in fact, carry out the famous Constitutional
mandate "To promote the Progress of Science and useful Arts, by securing for
limited Times to Authors and Inventors the exclusive Right to their respective
Writings and Discoveries?"
Thank you.
Mr. Kastenmeier. We thank you, Mr. Copland, for that fine state-
ment. Your gift for composition is not limited to music apparently.
Mr. Copland. Thank you, sir.
Mr. Kastenmeier. If you wish to summarize, Mr. Korman?
Mr. KoRMAN. If I may, Mr. Chairman. Mr. Mercer has a statement
in which he refers at page 2 to a list of organizations which in the
past have urged repeal of this so-called jukebox exemption. And this,
as the chairman knows, has been going on for a very long time. The
only people supporting the jukebox position have been the jukebox
industry itself.
The issues now are two. Mr. Mercer says, at the bottom of page 3,
they are: What is a fair performance fee; and should that fee be
subject to periodic review and adjustment as economic conditions
change ?
380
As you know, the Senate back in 1958 concluded that a fair fee
would be between $19 and $20, and 8 years later, in 1966, the House
Judiciary Committee came to the same conclusion. The bill as passed
by the House in 1967 provided for a fee of only $8, and that was
agreed to as a compromise because authors and composers recognized
the overriding public importance of general copyright revision,
I think it is important to stress that last year the Senate committee
stayed with the $8 fee only after providing a mechanism for periodic
review and adjustment. That mechanism is the Copyright Royalty
Tribunal, which would be empowered to review periodically and
adjust all of the compulsory license fees in the bill, the mechanical
license fee, the cable television license fee, and the jukebox license
fee.
ASCAP supports the Senate committee's approach. AVe believe
a strong case could be made for a fee higher than $8, but we will
accept the $8 fee provided it is subject to periodic review and adjust-
ment by the Copyright Royalty Tribunal.
Indeed, we can see no justification otherwise for any statutory
fee, and certainly not for a fee of only $8 for jukeboxes. Fees should
be arrived at by the normal bargaining process and, if special cir-
cumstances are believed to require compulsory licenses and statutory
fees, a mechanism for adjustment must l3e provided. Both sides should
know that if they fail to reach agreement on a reasonable fee, an im-
partial body stands ready to adjust the statutory fee on the basis of
a full record.
I might interject here that ASCAP has had 25 years of experience
under a consent judgment entered in the District Court for the South-
ern District of New York where the court has stood ready to fix
fees. Perry Patterson, who will be appearing later for the jukebox
manufacturers, has represented clients who would have been, in turn,
represented by all industry groups Avho have petitioned the court
to determine reasonable license fees. The court has never had to deter-
mine a license fee after a full hearing on the merits because the
parties have always reached an agreement.
The Music Operators of America has said in the past that small
operators could not be expected to bargain equally with the huge
organizations like SESAC, BMI, and ASCAP. The fact is, that MOA
would represent the industry, and we would sit down with MOA, as
I envision the procedure, and work something out w4th them on the
basis of what the current economic conditions are at the time. This
is the way things are done in other industries, and I see no reason
why the same procedure would not apply here.
There has also been talk in the past about how the rates would
drive jukebox operators out of business. Mr. Mercer says at the top
of page 6 of his statement :
Creators prosper when users prosper. We certainly have no incentive to seek
fees which would drive users out of business. With the Copyright Royalty
Tribunal available to adjust statutory fees to reasonable levels as conditions
change, subject always to veto by either House of Congress, we anticipate that
the parties would engage in good faith negotiations and reach fair agreements,
in the same way that business is normally conducted between buyers and sellers.
Congress surely should be very wary of writing into the new copyright law
any provision which may not only be unfair at the time of enactment, but
which is bound to become unfair later, as economic conditions change.
381
The choice is simply whether Congress wishes to continue to bear the
burden of hearing repeated arguments for changes in copyright fees, or whether
it would be more efficient to adjust tliese fees by the Tribunal mechanism.
The latter is clearly preferable, in our view.
Moreover, Mr. Chairman and members of the committee:
If the jukebox fee is not subject to adjustment by the Copyright Royalty
Tribunal, we may be sure that the cable television and record industries will
also seek the same treatment. If the point is won by one such large industry,
carefully worked out compromises involving other large industries may well
fall apart and much of the progress made in the spirit of compromise will be lost.
As a matter of principle, no composer, author or publisher would favor
any compulsory license permitting users to perform our works without con-
sulting us as to a fair price. But we have tried to see the point of view of
others and to cooperate in reaching a workable compromise in the higher
interest of securing enactment of this legislation.
H.R. 2223 is not a perfect bill, but we urge its enactment with one change :
It is essential that the jukebox fee, like the other statutory fees, be subject
to adjustment by the Copyright Royalty Tribunal.
Thank you.
[The prepared statement of Johnny Mercer follows:]
Statement of Johnny Mercek, Composer-Author, Made on Behalf of the
American Society of CoMPosiais, Authors, and Publishers
Mr. Chairman, my name is John H. Mercer. I was born in Savannah, Georgia,
and have spent most of my professional life as a songwriter in California where
I now reside.
I appear before you today on behalf of ASCAP but, like Mr. Copland, I
believe I speak for all creators of music, whatever their affiliation.
I am honored to appear before you today, but of course I am disappointed
that this important legislation has not yet been enacted. I appeared before
the Senate Copyright Subcommittee in 1967 to urge passage of a bill similar
to H.R. 2223. I earnestly hope that the efforts of this Subcommittee will bear
fruit.
I have been fortunate in writing songs the public has liked, among them,
"On The Atchison, Topeka and Santa Fe" (1946), "In the Cool, Cool, Cool of
the Evening" (1951), "Moon River" (1961) and "Days of Wine and Roses"
(1962), each of which won a Motion Picture Academy Award. Of course, like
all other songwriters, I have written many works that have had no success.
That's so common it can't even be called unfortunate. What is unfortunate is
that when my songs were most popular, many jukebox operators made a good
deal of money from members of the public who paid to hear them. I received
nothing for those performances.
My hope is that the brilliant young writers of today — the Carole Kings,
Neil Diamonds, Stevie Wonders, and John Denvers — whose works are now
the raw material of the juke box industry will be more fairly treated than
prior generations of songwriters.
There is, fortunately, no need to repeat in any detail the arguments made
so often in the past as to why the so-called juke box exemption should be
repealed. Rather, we should consider what all of the following meant when they
urged its repeal :
American Bai" Association
American Patent Law Association
Association of the Bar of the City of New York
Authors League of America, Inc.
California Bar Association
Copyright Office
Department of State
Federal Bar Association of New York, New Jersey and Connecticut
General Federation of Women's Clubs
Librai^ of Congress
National Federation of Music Clubs
National Music Council
382
These disinterested parties, together with the interested ones— ASCAP, BMI,
SESAC, the American Guild of Authors and Composers, and the National
Music Publishers Association— all urged repeal of this unfair exemption. What
we all meant, of course, is simply that the juke box industry, like all others
who profit from performing music, should pay fair and reasonable license fees.
Let me mention briefly two points and then turn to the real issue today.
First, the fact that the so-called exemption developed as a historical accident,
rather than as a conscious decision of Congress applicable to the modern juke
box industry, is well-known to this Committee and is discussed in the 1966
Committee Report (H.R. Rep. No. 2237, 89th Cong., 2d Sess.).
Second, it is equally well-established that, under arrangements between Ameri-
can and foreign performing rights organizations, American authors and com-
posers are paid for performances of their works on juke boxes in other countries.
The anomalous fact that we do not pay foreign authors and composers for our
performances of their works on juke boxes has caused friction in our interna-
tional copyright relations.
Now that the juke box industry agrees that it should pay for its performances,
two questions remain: What is a fair performance fee? And should that fee be
subject to periodic review and adjustment as economic conditions change?
In considering what fee is fair, we recall that in 1958 the Senate Judiciary
Committee concluded that a fair fee would be between $19 and $20 annually per
juke box. Eight years later, in 1966, the same conclusion was reached by the
House Judiciary Committee. But when the House passed the General Revision
Bill in 1967, the fee was $8. Authors and composers agreed to this much lower
fee as a compromise, because they recognized the overriding public importance
of general copyright revision.
Last year, the Senate Judiciary Committee considered this question and con-
cluded that a fee higher than $8 per year was warranted. Nevertheless, the Com-
mittee "endeavored to facilitate the progress of this [general revision] legisla-
tion by preserving * * * the rate adopted by the House of Representatives." (S.
Rep. No. 93-983, 93d Cong., 2d Sess., 1974, at 152) .
It is important to stress that the Senate Committee stayed with the $8 fee
only after providing a mechanism for periodic review and adjustment. That
mechanism is the Copyright Royalty Tribunal, which would be empowered to
review i>eriodically and adjust all of the compulsory license fees in the Bill —
the mechanical license fee, the cable television license fee and the juke box license
fee. At the last moment, on the Senate floor, juke box fees were exempted from
Tribunal review.
We support the Senate Committee's approach. We believe a strong case could
be made for a fee higher than $8. But we would accept the $8 fee, provided it
were subject to periodic review and adjustment by the Copyright Royalty
Tribunal.
Indeed, we can see no justification otherwise for any statutory fee, and cer-
tainly not for a fee of only $8 for juke boxes. Fees should be arrived at by the
normal bargaining process, and, if special circumstances are believed to require
compulsory licenses and statutory fees, a mechanism for adjustment must be
provided. Both sides should know that if they fail to reach agreement on a
reasonable fee, an impartial body stands ready to adjust the statutory fee on the
basis of a full record.
We have no hard current data on which to propose a reasonable juke box
royalty fee. What we suggest is that the $8 fee be accepted not because it is rea-
sonable but because a start must be made. The parties could thereafter sit down
and work out a reasonable fee on the basis of current economic conditions.
Creators prosper when users prosper. We certainly have no incentive to seek
fees which would drive users out of business. ASCAP and similar organizations
also have obligations to the creators we represent to seek a fair rate for the
valuable rights granted. With the Copyright Royalty Tribunial available to
adjust statutory fees to reasonable levels as conditions change, subject always
to veto by either House of Congress, we anticipate that the parties would engage
in good faith negotiations and reach fair agreements, in the same way that busi-
ness is normally conducted between buyers and sellers.
Congress surely should be wary of writing into the new Copyright Law any
provision which may not only be unfair at the time of enactment, but which is
bound to become unfair later, as economic conditions change.
The choice is simply whether Congress wishes to continue to bear the burden
of hearing repeated arguments for changes in copyright fees, or whether it
would be more efficient to adjust these fees by the Tribunal mechanism. The
latter is clearly preferable, in our view.
383
Mr. Chairman, if the past is any guide, the juke box industry will continue
to assert that it is an industry of small businessmen who are having a difficult
time surviving. The same may fairly be said of many music creators and pub-
lishers. And whether the operators are large or small really is irrelevant to the
basic questions here. We say they should pay, we say the amount should be fair
and we say it should be subject to adjustment by a simpler method than amend-
ment of the Copyright Law.
Moreover, if the jiike box fee is not subject to adjustment by the Copyright
Royalty Tribunal, we may be sure that the cable television and record industries
will also seek the same treatment. If the point is won by one such large industry,
carefully worked out compromises involving other large industries may well
fall apart and much of the progress made in the spirit of compromise will be
lost.
As a matter of principle, we do not favor any compulsory license permitting
users to perform our works without consulting us as to a fair price. But we have
tried to see the point of view of others and to cooperate in reaching a workable
compromise in the higher interest of securing enactment of this legislation.
H.R. 2223 is not a perfect bill but we urge its enactment with one change ; it is
essential that the juke box fee, like the other statutory fees, be subject to ad-
justment by the Copyright Royalty Tribunal.
Thank you.
[Subsequent to the hearing the following correspondence was re-
ceived for the record.]
American Society of Composers, Authors and Publishers,
New York, N.Y., August 6, 1975.
Re Copyright Revision Legislation (H.R. 2223).
Hon. Robert W. Kastenmeiek,
House of Representatives,
Washington, D.C.
Dear Congressman Kastenmeier: I understand that some months ago, a
suggestion was advanced that H.R. 2223 should be amended to exempt ballroom
operators from copyright liability in those cases where the bands are engaged as
"independent contractors", and impose liability solely upon the musicians.
ASCAP would strongly oppose any such amendment for a number of reasons.
First, we think the many cases holding the proprietor of a dance hall or similar
establishment liable for copyright infringement are sound. Performances of
musical compositions by a band or orchestra occur only when a proprietor believes
they will attract patrons and so enhance his revenues. This is true whether the
band members are engaged as employees or under agreements designed to make
them "independent contractors". Many cases impose liability whether or not the
proprietor had knowledge of the compositions to be played or exercised any con-
trol over their selection. The cases are reviewed in Shapiro, Bernstein & Co. v.
H. L. Ch-een Company, 316 F.2d 304 (2d Cir. 1963). The leading cases are:
Dreamland Ball Room v. Shapiro, Bernstein d Co., 36 F.2d 354 (7th Cir. 1929) ;
M. Witmark d- Sons v. Pastime Amusement Co., 298 Fed. 470 (E.D.S.C. 1924)
aff'd 2 F.2d 1020 (4th Cir. 1924) ;
Bourne v. Fouche, 238 F.Supp. 745 (E.D.S.C. 1965) ;
M. Witmark d Sons v. Tremont Social d Athletic Club, 188 F.Supp. 787 (D.
Mass.1960) ;
Shapiro, Bernstein d Co., Inc. v. Veltin, 47 F.Supp. 648 (W.D.La. 1942) ;
Harms v. Cohen, 279 Fed. 276 (E.D.Pa. 1921).
Indeed, in the Veltin case, the proprietor had stipulated in his contracts with
orchestra leaders that no ASCAP music be played, and had even gone so far as
to post signs in his establishment objecting to the performance of ASCAP music.
Nevertheless, he was held liable.
Exemption of the ballroom operators from copyright liability and imposition
of liability solely on the band would necessitate drastic and very expensive
changes in the way musical performances are licensed. In many instances, it
would become virtually impossible for the author, composer, and publisher of a
copyrighted work to secure any payment for the performance of his music.
ASCAP and other performing right licensing organizations license on an
annual or, in many cases, a seasonal basis. It is possible to do so because the same
owner can be dealt with on a year to year basis. The bands employed, on the
384
other hand, are often itinerant or even "pick-up" groups, constantly re-forming
with new personnel, who often play in one location for only a short period and
then move on to another or disband. Finding and licensing them would be much
more diflBcult and, of course, much more expensive than the present system.
AS CAP bases its license fees for performances in establishments such as ball-
rooms, taverns, and restaurants on objective factors, including seating capacity,
type and frequency of musical entertainment, admission, cover, or similar charge,
and drink prices. Because these factors, which constitute the establishment's
"operating policy", are fairly constant and can be easily determined in the event
of change ASOAP is able to keep its costs of licensing down, and consequently
maintain low license fees. The enclosed form of agreement shows the factors and
the rates which start at only $70 per year.
Under the proposed amendment, as it has been described to me, it would be
necessary for ASCAP to license the bands. It would be very difficult to locate
and keep track of the constant movement of all the different bands across the
country. Similarly, it would be necessary to determine the operating policy of
each establishment when a given band played, and base a license fee on the policy
during the period of the band's engagement. The higher cost of licensing on this
basis would have to be passed along in higher license fees.
Licensing musicians would also create diflBculties with the musicians' union,
the American Federation of Musicians (AFM). Article 25, Section 16 of the AFM
By-Laws (1973) provides:
"Leaders and members of the Federation are prohibited from assuming
any responsibility for the payment of license fees for any composition they
play and from assuming or attempting to assume any liability whatsoever
for royalties, fees, damage suits, or any other claims arising out of the
playing of copyright composition."
I think the question really comes down to who is most responsible for the
performance and who derives the principal benefit. Certainly, the band members
derive the benefit — they are paid to play. That payment, from the owner of the
establishment, is usually an amount less than the increased revenues to the
owner resulting from use of music. The proof of this is found in the frequent
practice of "testing" use of music : if business picks up, it is kept ; if it does not
pick up — and does not earn more than the cost of the music — it is discontinued.
In this sense, the use of music is "for profit" or it is not used at all.
Accordingly, the owner of the establishment decides whether music vsdll be
performed at all and, if it is. obtains a more significant return than the musicians.
Therefore we think it is fair that the owner should pay for the right to perform
the music.
With best wishes for a pleasant summer.
Respectfully,
Bernard Korman.
Enclosure.
385
GENERAL LICENSE AGREEMENT— RESTAURANTS, TAVERNS,
NIGHTCLUBS. AND SIMILAR ESTABLISHMENTS
JVgrPrntftlt between American Society of Composers, Authors and Publishers ("Society"),
located at
and
("Licensee"), located at as follows:
1. Grant and Term of License
(a) Society grants and Licensee accepts for a term of one year, commencing , and
continuing thereafter for additional terms of one year each unless terminated by either party as hereinafter pro-
vided, a license to perform publicly at
("the premises"), and not elsewhere, non-dramatic renditions of the separate musical compositions now or here-
after during the term hereof in the repertory of Society, and of which Society shall have the right to license such
performing rights.
(b) Either party may, on or before thirty days prior to the end of the initial term or any renewal term, give
notice of termination to the other. If such notice is given the agreement shall terminate on the last day of such
initial or renewal term.
2. Limitations on License
(a) This license is not assignable or translerablc by operation of law or otherwise, and is limited to the
Licensee and to the premises
(b) The broadcasting or telecasting or transmission by wire or otherwise, of renditions of musical composi-
tions in the Society's repertory to persons outside of the premises is prohibited,
(c) This license is limited to non-dramatic performances, and does not authorize any dramatic performances.
For purposes of this agreement, a dramatic performance shall include, but not be limited to, the following;
(i) performance of a "dramatico-musical work" (as hereinafter defined) in its entirety;
(ii) performance of one or more musical compositions from a "dramatico-musical work" (as hereinafter
defined) accompanied by dialogue, pantomime, dance, stage action, or visual representation of the work from
which the music is taken;
(iii) performance of one or more musical compositions as part of a story or plot, whether accompanied
or unaccompanied by dialogue, pantomime, dance, stage action, or visual representation;
(iv) performance of a concert version of a "dramatico-musical work" (as hereinafter defined).
The term "dramatico-musical work" as used in this agreement, shall include, but not be limited to, a musical
comedy, oratorio, choral work, opera, play with music, revue, or ballet.
3. License Fee
(a) In consideration of the license granted herein. Licensee agrees to pay Society the applicable license fee
set forth in the rate schedule printed below and made part hereof, based on "Licensee's Operating Policy" (as
hereinafter defined), payable quarterly in advance on January 1, April 1, July 1 and October 1 of each year. The
term "Licensee's Operating Policy," as used in this agreement, shall be deemed to mean all of the factors which
determine the license fee applicable to the premises under said rate schedule.
(b) Licensee warrants that the Statement of Licensee's Operating Policy on the reverse side of this agree-
ment is true and correct.
(c) Said license fee is Dollars ($ )
annually, based on the facts set forth in said Statement of Licensee's Operating Policy.
4. Changes in Licensee's Operating Policy
(a) Licensee agrees to give Society thirty days prior notice of any change in Licensee's Operating Policy.
For purposes of this agreement, a change in Licensee's Operating Policy shall be one in effect for no less than
thirty days.
(b) Upon any such change in Licensee's Operating Policy resulting in an increase in the license fee, based
on the annexed rate schedule, Licensee shall pay said increased license fee, effective as of the initial date of such
change, whether or not notice of such change has been given pursuant to paragraph 4(a) of this agreement.
(c) Upon any such change in Licensee's Operating Policy resulting in a reduction of the license fee, based
on the annexed rate schedule, Licensee shall be entitled to such reduction, effective as of the initial date of such
change, and to a pro rata credit for any unearned license fees paid in advance, provided Licensee has given Society
thirty days prior notice of such change. If Licensee fails to give such prior notice, any such reduction and credit
shall be effective thirty days after Licensee gives notice of such change.
(d) In the event of any such change in Licensee's Operating Policy, Licensee shall furnish a current State-
ment of Licensee's Operating Policy and shall certify that it is true and correct.
(e) If Licensee discontinues the performance of music at the premises. Licensee may terminate this agree-
ment upon thirty days prior notice, the termination to be effective at the end of such thirty day period. In the
event of such termination, Society shall refund to Licensee a pro rata share of any unearned license fees paid
in advance. For purposes of this agreement, a discontinuance of music shall be one in effect for no less than
thirty days.
5. Breach or Default
Upon any breach or default by Licensee of any term or condition herein contained. Society may terminate
this license by giving Licensee thirty days notice to cure such breach or default, and in the event that such breach
or default has not been cured within said thirty days, this license shall terminate on the expiration of such
thirty-day period without further notice from Society. In the event of such termination. Society shall refund
to Licensee any unearned license fees paid in advance.
6. Notices
All notices required or permitted hereunder shall be given in writing by certified United States mail sent to
either party at the address stated above. Each party agrees to inform the other of any change of address.
In Witness Whereof, this agreement has been duly executed by Society and Licensee this day
of , 19 .
AMERICAN SOCIETY OF COMPOSERS,
AUTHORS AND PUBLISHERS
By.
By-
DISTRICT MANAGER
(Fill In capacity in which signed:
(a) If corporation, state corporate office held; (b) If partner-
ship, write word "partner" under signature of signing partner;
(c) If individual owner, write "individual owner" under
signature.)
386
STATEMENT OF LICENSEE'S OPERATING POLICY
LICENSEE
PREMISES
FULL ADDRESS
TELEPHONE NO
Indicate only applicable factors:
1. Seating capacity
2. The highest price (when musical entertainment is provided) of:
a. Nationally advertised brand liquor $
b. Individual set-ups
c. Nationally advertised brand beer
d. Average price of dinner
3. Does establishment advertise its entertainment YES r~| NO PI
4. Description of Entertainment No. Nights Per Week Nights Used (Circle)
a. Single instrumentalist F"! Su M Tu W Th F So
b. Two or more instrumentalists [~\ Su M Tu W Th F So
5. Mechanical music not cleared ot the source
a. Radio [~\ No. of Speakers
b. Records Q
e. Tapes V~~\
6. Mechanical music cleared at the source
a. Records [ 1 Nome and address
b. Tapes Q o* supplier:
c. Wired Q
7. Show Q Act(s) Q Vocolist(s) Q Check if None Q
8. Charge mode
Admission Fl Minimum Q^ Cover [^ Entertainment Q|
Similar charge (describe): ♦
9. Alternate or relief music provided by inslrumentalist(s) Q
10. Number of rooms with musical entertoinment
*lf music is performed in more than one room, fill out and attach a seporote Statement of Operating Policy for
each room.
n. If seasonal operation, indicate seasonal period
Opening date Closing dote
Rote based on above policy $
(If more than one room,
total rate for premises $ )
CERTIFICATE
I hereby certify that the foregoing Statement of
Operating ' Policy is true ond correct as of this
day of , 19
By-
387
RATE SCHEDULE
This rate schedule applies to Bars, Grills, Taverns. Restaurants, Lounges, Supper Clubs, Night Clubs, Piano
Bars, Cabarets. Roadhouses and similar establishments where;
(a) The highest price (when musical entertainment is provided) of a nationally advertised brand of bourbon,
rye or scotch is less than 85« a drink; or
(b) If the establishment does not sell liquor, but sells beer, or if liquor or beer are not sold but the establish-
ment sells set-ups, the highest price (when musical entertainment is provided) of a bottle, can, draught,
or other serving of a nationally advertised domestic beer, or an individual set-up where beer is not sold,
is less than 50?.
ANNUAL RATE
LIVE MUSrC— SINGLE INSTRUMENiaLIST
LIVE MUSIC— TWO OH MODE INSTRUMENTtLISTS
Seatlni
Capacity
NliMs
Per
Weak
Basa
Rata
NO. OF VARIABLES
II
Mach.
Music
- Used.
Three Add
Basa
Rata
NO. OF VARIABLES'
It
Mach.
Music
Usad,
Three Add
HO LIVE MUSIC—
MECHANICAL MUSIC ONLY
Shaw ar
Actis) with
Mach. Admlsslen,
MUSIC Cevar, En-
Plus tertalnment
Basa Show or Similar
Rata or Act[s) Charca
1
$80
$105
$140
$190
$25
$90
$120
$160
$215
$25
$70
$105
$140
0-75
23
no
145
195
260
35
135
180
240
320
35
70
145
195
4-7
140
185
250
330
45
180
240
320
425
45
70
185
250
1
95
130
170
225
35
130
175
230
310
35
100
130
170
76-150
2-3
145
195
255
340
50
195
260
345
460
50
100
195
255
4-7
190
255
340
450
65
260
345
460
615
65
100
255
340
1
130
170
230
310
45
170
225
300
400
45
130
170
230
151-225
2-3
195
260
345
460
65
255
340
455
605
65
130
260
345
4-7
260
350
460
615
85
340
455
605
805
85
130
350
460
1
165
220
295
390
55
210
280
375
500
55
160
220
295
226-300
2-3
250
335
445
590
80
315
420
560
745
80
160
335
445
4-7
330
440
585
780
105
420
560
745
995
105
160
440
585
1
200
265
355
475
65
250
335
445
590
65
190
265
355
301-375
2-3
305
400
535
715
95
375
500
665
890
95
190
400
535
4-7
400
530
710
950
125
500
665
890
1185
125
190
530
710
1
235
315
420
560
75
290
390
515
685
75
220
315
420
376450
2-3
360
475
630
840
110
435
580
775
1030
110
220
475
630
4-7
470
630
840
1120
145
580
775
1030
1375
145
220
630
840
1
235
315
420
560
75
330
440
585
780
85
250
360
485
451-525
2-3
360
475
630
840
110
495
660
880
1175
125
250
540
730
4-7
470
630
840
1120
145
660
880
1175
1565
165
250
720
970
1
235
315
420
560
75
370
495
655
875
95
280
405
550
526-600
2-3
360
475
630
840
110
555
740
985
1315
140
280
610
825
4-7
470
630
840
1120
145
740
985
1315
1755
185
280
810
1100
1
235
315
420
560
75
370
495
655
875
95
310
450
615
601-675
2-3
360
475
630
840
110
555
740
985
1315
140
310
675
925
4-7
470
530
840
1120
145
740
985
1315
1755
185
310
900
1230
I
235
315
420
560
75
370
495
655
875
95
340
495
680
676-750
2-3
360
475
630
840
110
555
740
985
1315
140
340
745
1020
4-7
470
630
840
1120
145
740
985
1315
1755
185
340
990
1360
1
235
315
420
560
75
370
495
655
875
95
370
540
745
751 and over
2-3
360
475
630
840
110
555
740
985
1315
140
370
810
1120
4-7
470
630
840
1120
145
740
985
1315
1755
185
370
1080
1490
•variables (Applicable to single instrumentalist):
— Show or act(s) or vocalist(s).
— Admission, minimum, cover, entertainment or similar charge.
— Alternate or relief music (live) by an instrumentalist except in those cases where the alternate music
is provided solely at the time of a show or act(s).
''VARIABLES (Applicable to two or more instrumentalists);
— Show or act(s).
— Admission, minimum, cover, entertainment or similar charge.
— Alternate or relief music (live) by a band or an instrumentalist except in those cases where the
alternate music is provided solely at the time of a show or act(s).
lOM— 12/74 (C)
388
RATE SCHEDULE
This rate schedule applies to Bars, Grills, Taverns, Restaurants, Lounges, Supper Clubs, Night Clubs, Piano
Bars, Cabarets. Roadhouses and similar establishments where:
(a) The highest price (when musical entertainment is provided) of a nationally advertised brand of bourbon,
rye or scotch is 85e or more a drink; or
(b) If the establishment does not sell liquor but sells beer, or if liquor or beer are not sold but the establish-
ment sells set-ups, the highest price (when musical entertainment is provided) of a bottle, can, draught,
or other serving of a nationally advertised domestic beer, or an individual set-up where beer is not sold,
is 50^ or more.
A rate schedule applicable to establishments charging less than the amounts set forth above will be furnished
to such establishments.
ANNUAL RATE
NO LIV€ MUSIC-
MECHANICAL MUSIC ONir
LIVE MUSIC— SINGLE INSTRUMENTALIST
LIVE MUSIC— TWO OR MORE INSTRUMENTALISTS
Seating
Ctpaclty
NlEhts
Pet
Week
Base
Rate
HO. OF VARIABLES
H
Mech.
Music
Used.
Three ttd
Base
Rate
NO. OF VARIABLES
II
Mecli.
Music
Used,
TTiree Add
Mecn.
Music
Plus
Base Show
Rate or Act(s)
Show sr
Act(s) with
Admission,
Cover, En-
tertainment
or similar
Charge
1
$90
$120
$160
$215
$35
$120
$160
$215
$285
$35
$90
$120
$160
0-75
2-3
125
165
220
295
45
180
240
320
425
45
90
165
220
4-7
155
205
275
370
55
240
320
425
570
55
90
205
275
1
120
160
215
285
50
160
215
285
380
50
130
160
215
76-150
2-3
180
240
320
425
65
240
320
425
570
65
130
240
320
4-7
240
320
425
570
80
320
425
570
760
80
130
320
425
1
160
215
285
380
65
215
285
380
510
65
170
215
285
151.225
2-3
240
320
425
570
85
325
430
575
765
85
170
320
425
4-7
320
425
570
760
105
430
575
765
1020
105
170
425
570
1
200
265
355
475
80
270
360
480
640
80
210
265
355
226-300
2-3
300
400
535
715
105
405
540
720
960
105
210
400
535
4-7
400
535
710
950
130
540
720
960
1280
130
210
535
710
1
240
320
425
570
95
325
435
580
770
95
250
320
425
301-375
2-3
360
480
640
855
125
490
650
870
1155
125
250
480
640
4-7
480
640
855
1135
155
650
865
1155
1540
155
250
640
855
1
280
375
500
665
110
380
505
675
900
110
290
375
500
376450
2-3
420
565
745
995
145
570
760
1015
1350
145
290
560
745
4-7
560
750
995
1325
180
760
1015
1350
1800
180
290
750
995
1
280
375
500
665
no
435
580
775
1030
125
330
425
575
451-525
2-3
420
565
745
995
145
655
870
1160
1550
165
330
640
865
4-7
560
750
995
1325
180
870
1160
1545
2060
205
330
850
1150
1
280
375
500
665
110
490
655
870
1160
140
370
475
650
526-600
2-3
420
565
745
995
145
735
980
1305
1740
185
370
715
975
4-7
560
750
995
1325
180
980
1305
1740
2320
230
370
950
1300
1
280
375
500
665
110
545
725
970
1290
155
410
525
725
601-675
23
420
565
745
995
145
820
1090
1455
1935
205
410
790
1090
4-7
560
750
995
1325
180
1090
1455
1935
2580
255
410
1050
1450
1
280
375
500
665
110
600
800
1065
1420
170
450
575
800
676-750
2-3
420
565
745
995
145
900
1200
1600
2130
225
450
865
1200
4-7
560
750
995
1325
180
1200
1600
2130
2840
280
450
1150
1600
1
280
375
500
665
110
600
800
1065
1420
185
490
625
875
751 and over
2-3
420
565
745
995
145
900
1200
1600
2130
245
490
940
1315
4-7
560
750
995
1325
180
1200
1600
2130
2840
305
490
1250
1750
•variables (Applicable to single instrumentalist):
— Show or act(s) or vocalist (s).
— Admission, minimum, cover, entertainment or similar charge.
— Alternate or relief music (live) by an instrumentahst except in those cases where the alternate music
is provided solely at the time of a show or act(s),
•variables (Applicable to two or more instrumentalists):
— Show or act(s).
— Admission, minimum, cover, entertainment or similar charge.
— Alternate or relief music (live) by a band or an instrumentalist except in those cases where the
alternate music is provided solely at the time of a show or act(s).
SEASONAL RATES
For seasonal licensees, the rates for periods up to four months of operation are 1/2 the annual rate; for each
additional month the rate is 1/12 the annual rate. The seasonal rate will in no case be more than the annual rate,
COMPUTATION OF RATE FOR MIXED POLICIES
1. Compute rate for the higher policy for the number of nights that the higher policy is in effect. The "higher
policy" is the policy which generates the highest rate for any one day.
2. Note total number of nights entertainment is provided.
3. Compute rate for the lower policy using the total number of nights entertainment is provided under both the
higher and lower policies.
4. Compute rate for the lower policy using the number of nights the higher policy is in effect.
5. Subtract rate computed in step 4 from rate computed in step 3.
6. Add rate computed in step 1 to rate computed in step 5 for total rate.
150M— 12/74 (C)
389
Mr. Kastenmeier. Mr. Chapin, will Mr. Oliver be your next wit-
ness?
Mr. Chapin. Yes. If it is permissible to you, I would like to use
BMI's time first with Mr. Oliver's statement, and then I tliink that
Mr. Frank Peewee King is probably not going to be here in time. I
would like to just read a small portion of his statement. And finally,
with your permission, we had filed a supplemental statement that I
just want to submit for the record, if that is acceptable.
Mr. Kastenmeier. Without objection, statements by individual
members of the panel on behalf of your organization will be accepted
for the record.
[The prepared statement of Broadcast Music, Inc. follows :]
Statement of Broadcast Music, Inc.
BMI (Broadcast Music, Inc.) is the largest of the U.S. performing rights li-
censing organizations, representing over 40,000 writers and publishers located
in every state. Most of the copyrighted music heard in America today is licensed
by BMI.
The so-called jukebox exemption from payment of performance royalties was
enacted in 1909. It was unjustified at that time, and certainly is today. No one
seriously questions its inherent unfairness in 1975. Royalties are paid for all
other performances for profit. The jukebox industry should not be singled out
for a "free ride."
The anomaly of this situation is pointed up by the fact that in foreign countries
royalties are paid for performances on jukeboxes. It is strange that the composer
of Tennessee Waltz will be paid for a jukebox performance in Paris but not in
Nashville.
The real question then is not if the jukebox industry should pay but how
much they should pay.
Our position on the question of what the jukebox royalty rate should be is
simply that there should not be a fixed statutory rate. The fixing of such a rate
should be left to the usual processes of orderly negotiation between the interested
parties, i.e., the performing rights associations on one hand and the representa-
tives of the jukebox industry on the other hand. In this way, a true market
place value can be placed on the rights given to the jukebox opreators. This is the
way that rates are set for television, radio and most other users of music, and
for BMI this method has worked etficiently and in the best interest of all con-
cerned, the user, the creator and the public. There is no valid reason why the
jukebox industry should continue to be treated differently from others in the
music field.
If Congress were to set a fixed royalty rate, such rate would necessarily be-
come outmoded as economic factors changed. Nor is a cost of living escalation
provision the answer because other market factors both in the jukebox industry
and the music licensing field are constantly changing. Congress should stay
away from the rate making business. We should point out that Congress has
traditionally not taken it upon itself to legislate fixed rates. Generally, if rates
are fixed at all, it is the administrative agencies, and not Congress, which make
any rate determinations. As stated above, however, we do not favor even an
administrative agency being charged with this task. Such a Government agency
would inevitably mean increased administrative expense and therefore decreased
revenues to the beneficiaries of the amounts administered.
If Congress does adopt the above approach, in considering alternatives we
would urge that the Copyright Royalty Tribunal periodically review that rate
in a manner which can take into account all appropriate factors. As we stated
above, there is no valid reason why the jukebox industry should be treated
differently from other users of music.
If the Congress does not adopt a "free market place" approach or the Copyright
Royalty Tribunal approach, we submit that the $8 rate provided for in H.R.
2223 is not a fair value in today's market place. It must be remembered that such
rate was contained in the 1967 House of Representatives Copyright Revision
Bill. In eight years inflationary trends have certainly made any rates set in 1967
outmoded. Not to mention the ever increasing amounts the jukeboxes charge.
Even in 1958 the Senate Committee on the Judiciary determined that a j early
per box payment of $19.70 would be reasonable.
390
Furthermore, it is important to recognize liow the $8 rate was arrived at in
1967. It was the result of a compromise worked out by the Copyright OflSce with
the understanding that this would remove one of the last barriers to immediate
copyright revision. Thus, the consideration was that the jukebox owners would
begin paying in 1968 at the rate of $8 a box. Obviously, that consideration is
no longer valid because there has been no copyright revision bill, and, more im-
portant, the jukebox owners have not paid anything during the past 8 years.
The above is in summary form and we would be pleased to submit, in writing
or at a hearing, any additional comments or information which you, or your sub-
committee, may desire. We, of course, would like to reserve our right to comment
further as the legislative process on copyright matters unfolds in the 94th Con-
gress.
Mr. Kastenmeier. The Chair should observe that 10 years ago here
Mr. Herman Finkelstein, Mr. Korman's predecessor, represented
ASCAP, and was it not Sydney Kaye who represented BMI for so
many years, both very distinguished people, but apparently they have
both retired in terms of actively representing the organizations.
Mr. KoRMAN. Perhaps, Mr. Chairman, they just got discouraged.
I notice that the same spokesmen are continuing to appear for the
jukebox industry.
Mr. Kastenmeier. Well, I should hope not.
Mr. Oliver, we will call on you.
TESTIMONY OF SY OLIVER, COMPOSER, ACCOMPANIED BY EDWARD
CHAPIN, GENERAL COUNSEL, BROADCAST MUSIC, INC.
Mr. Oliver. Mr. Chairman and gentlemen, my name is Sy Oliver.
I am an arranger/composer and orchestra leader. I wish to speak to
the removal of the jukebox exemption from payment for use of copy-
righted music.
May I interject here, I am not speaking to the fiscal details involved.
I am a writer. I do not have those facts at hand, and I am sure that
that will be taken care of. But I would just like to speak my own posi-
tion as a writer.
Gentlemen, this exemption was established by a law written in the
year 1909. One year before I was born and many years before the music
industry, as it exists today, came into being. And yet this law, written
in good faith but for another time and totally different circumstances,
still pertains.
I have been a professional musician since 1928. I was a member of
the Jimmie Lunceford Orchestra when it achieved international atten-
tion in the thirties, ranking in popularity with the great Duke Elling-
ton. Many of my compositions, as recorded by that orchestra, were
outstanding hits and are currently popular both in sales and radio
plays as well as jukebox plays. I am paid writers royalties from record
sales, performance royalties from radio plays but nothing from 40
years of jukebox plays.
During the years 1939 through 1943 1 composed and arranged for the
Tommy Dorsey Orchestra. Again many of my compositions such as
"Opus One" and "Yes Indeed" became famous record hits. The latter
two, according to BMI performance records, each enjoyed more than a
million radio performances by the midfifties. Again I was paid for
record sales, radio performance. Nothing for jukebox plays which
exceeded radio plays many times.
After my Army service I became musical director for Decca Rec-
ords. Currently, I am leading my own orchestra for an extended en-
391
gagement at the Kainbow Room in Rockefeller Center, New York
City.
The foregoing is to establish that I am indeed involved in the prob-
lem at hand.
As a member of the Jimmie Lunceford Orchestra, I began record-
ing for the Decca Record Co. in 1934. It was about this time that the
situation with which we are faced today was born — the time when the
writers and publishers made a major sacrifice for the then infant juke-
box industry. More of this later.
It should be noted that at the time the law exempting jukeboxes from
payment for use of copyrighted music was written, there was no juke-
box industry as we know it. Machines for playing records were to be
found in cafes and saloons along with roll-phiymg pianos but they were
the exclusive property of the pi'oprietors — solely for the entertainment
of his customers. It is unlikely that the proprietor ever realized the
cost of the machine from its revenue, certainly not a profit. Hence the
exemption. Gentlemen, the exemption was decreed because no profit
was being derived from the use of copyrighted music. That is not
the cELse today. Nor could the legislators of 1909 be expected to antic-
ipate the conditions existent in 1975.
So it was with the writers and publishers I mentioned earlier on.
Never dreaming in 1934 that the jukebox industry would become the
giant it is today, they agreed to reduce their royalty rate by 50 per-
cent which it remains today, to permit the sale of a 35-cent record as
opposed to the standard 75-cent price. This 35-cent record was for the
benefit of the jukebox sales. Admittedly a shortsighted policy in hind-
sight. But, rightly or wrongly, the end result was, the tail is finally
wagging the dog. For today, I firmly believe that more profit is
made from the jukebox play of copyrighted music than any other
single source. For this the jukebox industry pays nothing, making the
copyright law as it exists meaningless. I do not believe the legislators
of 1909 intended this.
It should be noted that all other creative work produced by Ameri-
cans is protected by our copyrighted code.
For instance, books published for public sale but private use cannot
be used in whole or even in part for purposes of ]:)rofit such as movies,
TV, or stage plays without the permission of, and compensation to, the
owner of copyright or his agent.
Conversely, musical recordings employing copyrighted music and
similarly published for public sale but private use are being used
for purposes of profit by the coin machine oj^erators with no return
to the owners of copyright. Much as though MGM had made "Gone
With the Wind" without compensation to the owner of copyright.
So, on behalf of all writers and publishers, I ask for the removal of
the jukebox industry's exemption from payment for the use of copy-
righted music for purposes of profit — a contingency not anticipated
by the writers of the code of 1909 and still in effect.
Thank you.
[The prepared statement of Sy Oliver follows :]
Statement of Sy Oliver, Representing Broadcast Music, Ino.
My name is Sy Oliver. I am an arranger/composer and orchestra leader. I wish
to speak to the removal of the jukebox exemption from payment for use of copy-
righted music.
392
Gentlemen, this exemption was established by a law written in the year nine-
teen hunderd and nine! (1909). One year before I was bom and many years be-
fore the music industry, as it exists today, came into being. And yet this law,
written in good faith but for another time and totally different circumstances
still pertains.
I have been a professional musician since 1928. I was a member of the Jimmie
Lunceford Orchestra when it achieved international attention in the thirties,
ranking in popularity with the great Duke Ellington. Many of my compositions,
as recorded by that orchestra, were outstanding "hits" and are currently popular
both in sales and radio plays as well as jukebox plays. I am paid writers royalties
from record sales, performance royalties from radio plays but nothing from forty
years of jukebox plays.
During the years 1939 through 1943 I composed and arranged for the Tommy
Dorsey Orchestra. Again many of my compositions such as OPUS ONE and YES
INDEED became famous record "hits." The latter two, according to BMI per-
formance records each enjoyed more tham a million radio performances by the
mid-fifties. Again I was paid for record sales, radio performance. Nothing for
jukebox plays which exceeded radio plays many times.
After my Army service I became musical director for Decca Records. Cur-
rently I am leading my own orchestra for an extended engagement at the Rain-
bow Room in Rockefeller Center, New York City.
The foregoing is to establish that I am indeed involved in the problem at hand.
As a member of the Jimmie Lunceford Orchestra, I began recording for the
Decca Record Company in 1934. It was about this time that the situation with
which we are faced today was born — the time when the writers and publishers
made a major sacrifice for the then infant jukebox industry. More of this later.
It should be noted that at the time the law exempting jukeboxes from pay-
ment for use of copyrighted music was written, there was no jukebox industry as
we know it. Machines for playing records were to be found in cafes and saloons
along with roll-playing pianos but they were the exclusive property of the prop-
rietors . . . solely for the entertainment of his customers. It is unlikely that the
proprietor ever realized the cost of the machine from its revenue, certainly not
a profit. Hence the exemption. Gentlemen, the exemption was decreed because No
Profit was being derived from the use of copyrighted music. That is not the case
today. Nor could the legislators of 1909 be expected to anticipate the conditions
extant in 1975.
So it was with the writers and publishers I mentioned earlier on. Never dream-
ing in 1934 that the jukebox industry would become the giant it is today, they
agreed to reduce their royalty rate by 50% which it remains today, to permit
the sale of a 35^ record as opposed to the standard 75^ price. This 350 record
was for the benefit of the jukebox sales. Admittedly a short-sighted policy in
hind sight. But, rightly or wrongly the end result was — the tail is finally wag-
ging the dog. For today, I firmly believe that more profit is made from the juke-
box play of copyrighted music than any other single source. For this the jukebox
industry pays nothing, making the copyright law as it exists meaningless. I do
not believe the legislators of 1909 intended this.
It should be noted that all other creative work produced by Americans is pro-
tected by our copyright code.
For instance — books published for public sale but Private use can not be used
in whole or even in part For Purposes of Profit such as movies, TV, or stage
plays without the permission of and compensation to the owner of copyright or
his agent.
Conversely, musical recordings employing copyrighted music and similarly pub-
lished for public sale but private use are being used For Purposes of Profit by
the coin machine operators with no return to the owners of copyright. Much as
though MGM had made Gone With The Wind without compensation to the owner
of copyright.
So — on behalf of all writers and publishers — I ask for the removal of the juke-
box industry's exemption from payment for the use of copyrighted music for
purposes of profit. ... a contingency not anticipated by the writers of the code
of 1909 and still in effect.
Mr. Kastenmeier, Thank you, Mr. Oliver.
We shall ask questions after all the witnesses have concluded, and the
Chair will not attempt to identify the compositions or the accomplish-
ments and honors that may be represented by our very distinguished
393
witnesses. I assume the people are sufficiently aware of your accom-
plishments.
The Chair would also observe for the benefit of the subcommittee
that this morning we have three performance rights societies, which
for all practical purposes, represent 99 or more percent of the authors
and composers in America. And on the other economic side of the issue
there is one predominant organization, the Music Operators of
America, the association of jukebox operators. And also a representa-
tive of the manufacturers of those jukeboxes who will also, of course,
have an economic interest in the copyright and the question that we are
disposing of, hopefully.
Mr. Chip Davis and Mr. Ciancimino. Or did you wish to withhold
until you determine whether or not Mr. King will arrive?
Mr. Chapin. I have since heard that it does not look like he is going
to arrive, so with your permission, could I read portions of his state-
ment ?
Mr. Kastenmeier. Yes, you may. And because we are losing time, Mr.
Chapin, if you would do so as concisely as you can. I see it is a short
statement.
Mr. Chapin. It is a very short statement, and I do not propose to read
the first page and one-half which outlines who he is, what he has
written and so forth. I will pick up in the middle of page 2 where he
gives his conclusions and which are also BMI's conclusion. And this, as
I say, is the statement of Mr. Frank Peewee King.
"Let us look at the economics of the coin machine business, particu-
larly as it affects a songwriter. A record of 'Tennessee Waltz' sells for
$1.25. Of this, the writers, two of us. Redd Stewart and me make 1 cent.
Half to me, half to Redd. This is all the jukebox operators actually
pay writers for the songs they put into their machines; 1 cent per
machine. The jukebox operator gets at least a dime — 10 cents — each
'time 'Tennessee Waltz' is played on his jukebox. Today's phonograph
records will play up to 1,000 times before wearing out completely. This
means that it is possible for the jukebox operator to make at least $100
per machine from 'Tennessee Waltz' from a record that he paid $1.25
for, if he had to buy them retail and he usually doesn't. Out of this
Redd and I split 1 cent, one ten-thousandth of the take.
"The jukebox industry has grown by a half since writers last testi-
fied before the Congress 10 years ago. This can hardly be true of a so-
called suffering business. Over 750,000 machines are now in use. I keep
reading about video disks, and other entertainment devices that use
music now being perfected and readied for the market. Knowing the
business shrewdness and imagination of the coin machine people, I
know that good and prosperous use will be made of these machines. I
don't want any future coin machine use of music to be discounted, or
Avritten out of a new law as it was out of the last one, the 1909 act we
have today.
'. "Jukebox operators should pay writers for the performances of their
•songs. All other American users do, users in other countries do as well.
When an American song is playc/d in a French jukebox the American
composer is paid for the performance. When the same song is played
on an American machine, he is not paid for the performance.
"TV stations and networks, radio stations and networks, ballrooms,
concert halls, restaurants, night clubs, skating rinks, background music
57-786 O - 76 - pt. 1 = 26
394
services, airlines and others pay for music, even though music is not
their only product. But music is the jukebox operators only product.
Yet the jukebox operator is the only one not paying writers and
publishers for music.
"What we ask you to do is to pass a law that removes the unfair
jukebox exemption. We ask you to fix a rate of payment that is fair,
just and proper. We ask you to undo years and years of free .riding
on the talent of songwriters. That's what I ask you to do on behalf
of the 40,000 writers and publishers in BMI for whom I speak."
[The prepared statement of Frank Peewee King follows :]
Statement of Frank Peewee King, Representing Broadcast Music, Inc.
I am Frank Peewee King and I presently live in Louisville, Kentucky, being
born and raised in Wisconsin. I appear today representing BMI — Broadcast
Music Inc. — and also speaking for myself as a writer and a publisher
I have written and collaborated on 300 songs, or more. I have written such
songs as Tennessee Waltz, Slow Poke, You Belong to Me and Bonaparte's Re-
treat. All of these have been number one on the trade paper charts and all of them
are still available on 45-rpm discs for play by juke boxes.
In 1974 I was elected to the Country Music Hall of Fame in Nashville. That's
a great honor, equal to that when Tennessee selected my song to be its state
song. That gave me a thrill, and I could understand how Rodgers and Hammer-
stein felt when Oklahoma honored their song.
I have been writing and playing professionally since I was 14 years old. My
dad was a polka player in Wisconsin and I grew up as a youngster with a con-
certina in my lap. That started me writing country and folk and popular music.
I have written a lot of polka music as well. Now, polka music doesn't get played
on radio or television very much. But you can be sure that it gets a good go
round on coin machines.
I am probably the only witness you are going to hear today who's been a
longtime juke box customer It's a part of my way of life. I do a lot of touring
around the country, most of it by bus, going from one date to another with my
group. And every diner, bus station or truck stop we come to has a big, shining
and expensive juke box. I have put a lot of coins — nickels, dimes and now quar-
ters— to hear music — very often my own. But, although I have been a good
customer, and an even greater supplier of what once used to be called nickel
nabbing music — I have never gotten even one nickel back for the use of my
music.
Being a businessman as well as a composer I like to think out problems in
terms of economics.
Let's look at the economics of the coin machine business, particularly as it
affects a songwriter. A record of Tennessee Waltz sells for $1.25. Of this, the
writers, two of us. Redd Stewart and me, make I4. Half to me, half to Redd.
This is all the juke box operators actually pay writers for the songs they put
into their machines. One cent per machine. The juke box operator gets at least
a dime — 10 cents — each time Tennessee Waltz is played on his juke box. Today's
phonograph records will play up to 1,000 times before wearing out completely.
This means that it is possible for the juke box operator to make at least $100.00
per machine from Tennessee Walts, from a record that he paid $1.25 for — if he
had to buy them retail and he usually doesn't. Out of this Redd and I split one
cent — one ten thousandth of the take.
The juke box industry has grown by a half since writers last testified before
the Congress ten years ago. This can hardly be true of a so-called suffering busi-
ness. Over 750,000 machines are now in use. I keep reading about video disks,
and other entertainment devices that use music now being perfected and readied
for the market. Knowing the business shrewdness and imagination of the coin
machine people, I know that good and prosperous use will be made of these ma-
chines. I don't want any future coin machine use of music to be discounted, or
written out of a new law as it was out of the last one . . . the 1909 act we have
today.
Juke box operators should pay writers for the performances of their songs. All
other American users do, users in other countries do as well. When an American
song is played in a French juke box the American composer is paid for the per-
395
formance. When the same song is played on an American machine, he is not
paid for the performance.
TV stations and networks, radio stations and networiis, ballrooms, concert
halls, restaurants, night clubs, skating rinks, background music services, air-
lines and others pay lor music, even tliough music is not their only product. But
music is the juke box operators only product. Yet the juke box operator is the
only one not paying writers and publishei'S for music.
What we ask you to do is to pass a law that removes the unfair juke box ex-
emption. We ask you to fix a rate of payment that is fair, just and proper. We
ask you to undo years and years of free riding on the talent of songwriters. That's
what I ask you to do on behalf of the 40,000 writers and publishers in BMI for
whom I speak.
Mr. Kastenmeier. Thank you.
I note that our distinguished colleague on the Judiciary Committee
has joined our panel this morning, Mr. Mazzoli. And I am sure he would
like to have greeted Mr. Frank Peewee King who is presently re-
siding in Louisville had he been present.
Mr. Mazzoli. Thank you, Mr. Chairman. That is not the only reason
that I came this morning, but that was obviously one of the many. Mr.
King is a very distinguished member of our community, and recently
an inductee to the country music Hall of Fame. And as one who still
has and for many years has had an interest in country music particu-
larly, Peewee King and Redd Stewart, who the gentleman just men-
tioned, are very important people in our community. And I remember
vividly as a young boy Peewee and Redd and Redd's brother and
others had an aggregation that was on television every week, and I
guess we all grew up as kids in the Louisville community knowing Pee-
wee King.
So if 1 happen not to see him today, if you will please convey to him
my best wishes.
Mr. Chapin. I certainly will.
Mr. Mazzoli. Thank you, Mr. Chairman.
Mr. Kastenmeier. The Chair would also like to observe that Peewee
King notes that he was born and raised in Wisconsin.
Mr. Mazzoli. I wish you had not said that. Does the chairman have
any connection with the State of Wisconsin?
Mr. Pattison. We hum the "Tennessee Waltz" a lot up in New York.
Mr. Kastenmeier. Next, the Chair would like to call on Mr. Chip
Davis.
[The prepared statement of Louis F. (Chip) Davis follows:]
Statement of Chip Davis
Mr. Chairman, Members of the Committee : I h,ave been invited to testify on
behalf of SESAC Writers. I am a young and very new writer in tlie industry
and even though having three country western hits, this year I still find it
difficult to make a living as a writer. This makes the juke box issue a very impor-
tant one to me and also to my co-writers and colleagues.
A writer's income is derived from portions of publishing, portions of mechan-
ical licenses and performance royalties. In each case, the product has been per-
formed or issued with the intent of making money, or in other words performance
for pay ; and in each ca.se a certain allotment or portion (royalty) is paid to the
people who created the product.
It would seem to me that the juke box is a valid vehicle of and for public
performance for pay, and that a provision should be made on the behalf of the
creators of the product being sold on the juke boxes, to receive payment for
the use of their creations.
The 1967 agreement between the juke box industry and performing rights
societies certainly is an improvement, but in my opinion, would be more viable if
396
the eight dollar ('$8.00) per box fee were subject to periodic review due to the
cost of living increase.
Another strong point in favor of juke box royalties is related to publishing.
Many of the new, young composers are trying to set-up publishing companies
and cash flow from juke box royalties would aid in developing new talent and
promoting new writers.
It is evident that the juke box operators have been making profit from the
use of music for many years without liaving to pay the creators of that music
any royalty. I strongly support the moral obligation to pay monies to the gen-
erators of projects when the projects are being used in money-making ventures.
TESTIMONY OF LOUIS F. (CHIP) DAVIS, COMPOSER
Mr. CiANCiMiNO. Mr. Chairman, I would like to briefly introduce
Mr. Chip Davis, an author and composer who has been affiliated with
SESAC for the last few years, and who would like to say a few words
about the jukebox issue.
Mr. Davis is the composer of all of the music currently contained
on the No. 1 country album today, called Wolf Creek Pass. He has
written every number on that album. He has recently had three of his
songs released as singles, 2 of which were among the top 10 on the
country charts, and the third of which is climbing the charts at the
present time.
In addition, Mr, Davis is the recipient of a Cleo Award for 1974 as
an author of a regional commercial.
Gentlemen, you have heard from the distinguished Aaron Copland,
and you have heard from the well \ersed Sy Oliver, and I now pre-
sent a young and very talented author and composer, Mr. Chip Davis.
Mr. Kastenmeier. Mr, Davis.
Mr. Davis. Mr. Chairman, members of the committee. I have been
invited to testify on behalf of SESAC writers. I am a young and very
new writer in the industry and even though having three country
western hits, this year I still find it difficult to make a living as a
writer. This makes the jukebox issue a very important one to me and
also to my cowriters and colleagues.
A writer's income is derived from portions of publishing, portions
of mechanical licenses, and performance royalties. In each case, the
product has been performed or issued with the intent of making money,
or in other Avords, performance for pay; and in each case a certain
allotment or portion — royalty — is paid to the people who created the
product.
It would seem to me that the jukebox is a valid vehicle of and for
public performance for pay, and that a provision should be made on
the behalf of the creators, of the product being sold on the jukeboxes,
to receive payment for the use of their creations.
The 1967 agreement between the jukebox industry and performing
rights societies certainly is an improvement but, in my opinion, would
be more viable if the $8 per box fee were subject to periodic review due
to the cost-of-living increase.
Another strong point in favor of jukebox royalties is related to pub-
lishing. Many of the new, yoinig composers are trying to set up pub-
lishing companies and cash flow from jukebox royalties would also
aid in developing new talent and promoting new writers.
397
It is evident that the jukebox operators have been making profit
from the use of music for many years without having to pay the cre-
ators of that music any royaky. I strongly support the moral obligation
to pay moneys to the generators of projects when the projects are being
used in moneymaking ventures.
Mr. Kastenmeier. Thank you, Mr. Davis.
Mr, Ciancimino.
[The prepared statement of Mr. Ciancimino follows :]
Statement of Albert F. Ciancimino, Counsel for SESAC, Inc.
Mr. Chainnan, members of the Committee, my name is Albert F. Ciancimino,
and I am a member of the New York Bar and counsel to SESAC Inc. in New
York.
Until now, yon have heard from several distinguished authors and composers
on what they think of Sections 116 and 801 of H.R. 2223. I have the privilege
of being the only attorney testifying on behalf of the performing rights industry.
As such, perhaps a brief review of the history of the jukebox issue isi in order.
The Copyright Law of 1909 does exempt julvebox operators from the ijayment
of performance I'oyalties. This anachronism and inequity in our existing law
continues to the present day. Extensive hearings were conducted in the 80th, the
82nd Congress, the 83rd, the 85th and the 86th on the use of musical compositions
on coin-operated machines. Finally, the 88th Congress, in 1963, a bill was reported
by the full Committee on the Judiciary of the House of Representatives to remove
the jukebox exemption. However, the 88th Congress adjourned before the bill
was cleared by the Rules Committee for House Action. In 1967, the House did
pass a bill (H.R. 2.512) which provided for an annual compulsory license fee
of $8.00 per box. H.R. 2512 was not enacted. In subsequent considerations of
the jukebox issue, the Senate created a Copyright Royalty Tribunal to review
all rates fixed in the statute. However, by amendment to Section 801, the $8.00
jukebox fee was removed from the scope of the Tribunal's authority and this
is where we stand today.
At this point, some questions come to mind : What makes the jukebox industry
so si>ecial? Why does such an obvious public performance for profit continue
to go uncompensated to this day? Further, why does this industry need to have
a fixed rate provided by Congress? And further still, why should this fixed rate,
of all the fixed rates in H.R. 2223, be placed beyond the .scope of the Royalty
Tribunal's authority? The.se are difficult questions for someone like Chip Davis
to understand, and these are the difficult questions that we are posing to this
Committee today.
There is no compelling economic necessity for having a jukebox rate frozen
into the statute. The fixing of such a rate should be left to the ordinary processes
of bargaining in a free mai'keting. It is only in this way that a true value
can be placed on the rights granted to jukebox operators by the i^erforming
rights organizations. This is the way it is done with almost every other industry
which relies upon music, and the jukebox industry has no unique attributes which
would require different treatment. The disadvantages of a statutorily fixed
royalty rate should be obvious. One need only be reminded that the original
eight dollar rate was contained in the 1957 House of Representatives Copyright
Revision Bill. If that Bill had become law, we would have had 18 years of infla-
tionary erosion which would have reduced the value of the eight dollar fee
considerably and rendered it out-moded in comparison to modern-day values and
prices.
However, should Congress choose to place fixed rates in the revision bill in
certain areas, we see no reason to exclude the jukebox rate from the authority
of the Copyright Royalty Tribunal. In Section 801. a Copyright Royalty Tribunal
would be created to make determinations concerning the adjustment of certain
copyright royalty rates — in particular, the rate for cable television in Section
111, and the rate for compulsory mechanical licensing of phonograph records in
Section 113. As H.R. 2223 is presently constituted, the jukebox royalty of $8.00
per box will be the only fixed royalty rate wlrich would not be subject to revision
by the Royalty Tribunal. We submit that there is no reason whatsoever for
such special treatment to be accorded to the jukebox industry. Any arguments
of economic erosion or declining business trends put forth by the jukebox industry
should be left to the sound discretion of a Royalty Tribunal in the periodic
398
review of the jukebox rate. The Tribunal would relieve Congress of the burden
of making the necessary studies to determine whether a periodic adjustment of
the jukebox fee would be justified.
In the event, however, that Congress chooses to exclude the jukebox royalty
rate from the Tribunal's authority, may we submit that the eight dollar fee
per box is woefully inadequate. It was inadequate in 1957 and is even more so
today. If subject to review by the Tribunal, we would be willing to adliere to
the $8.00 fee agreed to in 1967 on the floor of the house. If the jukebox fee is
not made part of the authority to review rates given to the Copyright Tribunal,
we would urge that inflationary trends since tlie 1967 agreement of $8.00 per
box be considered and that the fee be raised accordingly in order to reflect such
trends.
In conclusion : We reiterate our longstanding opposition to the inclusion of
a fixed royalty rate in the statute for the jukebox industry. However, should
a fixed rate be included in the statute, with a means for review by the Copyright
Royalty Tribunal, we would adhere to the $8.00 fee agreed upon in 1967. If
there be no provision for review by the Copyright Royalty Tribunal, we would
hope that Congress would recognize the inequity of the $8.00 fee and consider
inflationary trends since 1967 in order to arrive at a more equitable statutory
royalty rate. This would, to some small degree, comiiensate for the free use of
music by jukebox operators since the 1967 compromise.
TESTIMONY OF ALBERT F. CIANCIMINO, COUNSEL FOR SESAC, INC.
Mr. CiANciMiNO. Mr. Chairman and members of the committee, I
am Albert F. Ciancimino, and I am a member of the New York bar
and counsel to SESAC Inc. in New York.
Until now, you have heard from several distinguished authors and
composers on what they think of sections 116 and 801 of H.R. 2223. I
have the privilege of being the only attorney testifying on behalf of the
performing rights industry. As such, perhaps a brief review of the
history of the jukebox issue is in order.
The copyright law of 1909 does exempt jukebox operators from the
payment of performance royalties. This anachronism and inequity
in our existing law continues to the present day. Extensive hearings
were conducted in the 80th, the 82d, the SSd, the 85th, and the 86th
Congress on the use of musical compositions on coin-operated ma-
chines. Finally, in the 88th Congress, in 1963, a bill was reported by
the full committee on the Judiciary of the House of Representatives
to remove the jukebox exemption. However, the 88th Congress ad-
journed before the bill was cleared by the Rules Committee for House
action. In 1967, the House did pass a bill, H.R. 2512, which provided
for an annual compulsory license fee of $8 per box. H.R. 2512 was
not enacted. In subsequent considerations of the jukebox issue, the
Senate created a Copyright Royalty Tribunal to review all rates
fixed in the statute. However, by amendment to section 801, the $8
jukebox fee was- removed from the scope of the tribunal's authority
and this, gentlemen, is where we stand today.
At this point, some questions come to mind : What makes the jukebox
industry so special? Why does such an obvious public performance
for profit continue to go uncompensated to this day? Further, why
does this industry need to have a fixed rate provided by Congress?
And further still, why should this fixed rate, of all the fixed rates in
H.R. 2223, be placed beyond the scope of the Royalty Tribunal's au-
thority? These are difficult questions for someone like Chip Davis
to understand, and these are the difficult questions that we are posing
to this committee today.
There is no compelling economic necessity for having a jukebox rate
frozen into the statute. The fixing of such a rate should be left to
399
the ordinary processes of bargaining in a free marketplace. It is only
in this way that a true value can be placed on the rights granted
to jukebox operators by the performing rights organizations. This
is the way it is done with almost every other industry which relies
upon music, and the jukebox industry has no unique attributes which
w^ould require different treatment. The disadvantages of a statutorily
hxed royalty rate should be obvious. One need only be reminded that
the original $8 rate was contained as far back as in the 1957 House
of Representatives copyright revision bill. If that bill had become
law, we would have had 18 years of inflationary erosion which would
have reduced the value of the $8 fee considerably and, in fact, rendered
it outmoded in comparison to modern day values and prices.
However, should Congress choose to place fixed rates in the revision
bill in certain areas, we see no reason to exclude the jukebox rate from
the authority of the Copyright Royalty Tribunal. In section 801, a
Copyright Royalty Tribunal would be created to make determinations
concerning the adjustment of certain copyright royalty rates — in
particular, the rate for cable television in section 111, and the rate
for compulsory mechanical licensing of phonograph records in section
113.
As H.R. 2223 is presently constituted, the jukebox royalty of $8
per box will be the only fixed royalty rate which would not be subject
to revision by the Royalty Tribunal. We submit that there is no reason
whatsoever, and I would like to emphasize, no reason whatsoever,
for such special treatment to be accorded to the jukebox industry. Any
arguments of economic erosion or declining business trends put forth
by the jukebox industry should be left to the sound discretion of a
Royalty Tribunal in their periodic review of the jukebox rate. The
Tribunal would relieve Congress of the burden of making the neces-
sary studies to determine whether a periodic adjustment of the jukebox
fee would be justified.
In the event, however, that Congress chooses to exclude the jukebox
royalty rate from the Tribunal's authority, and we hope this will not
be the case, may we submit that the $8 fee per box is woefully inade-
quate. It was inadequate in 1957 and is even more so today. If sub-
ject to review by the Tribunal, we would be willing to adhere to the
$8 fee agreed to in 1967 on the Floor of the House. If the jukebox
fee is not made part of the authority to review rates given to the
Copyright Tribunal, we would urge that inflationary trends since the
1967 agreement of $8 per box be considered and that the fee be raised
accordingly in order to reflect such trends.
In conclusion, Mr. Chairman and members of the committee, we
reiterate our longstanding opposition to the inclusion of a fixed royalty
rate in the statute for the jukebox industry. However, should a fixed
rate be included in the statute, with a means for review by the Copy-
right Royalty Tribunal, we would adhere to the $8 fee agreed upon in
1967. If there be no provision for review by the Copyright Royalty
Tribunal, we would hope that Congress would recognize the inequity
of the $8 fee and consider inflationary trends since 1967 in order to
arrive at a more equitable statutory royalty rate. This would, to some
small degree, compensate for the free use of music by jukebox operators
since the 1967 compromise.
Thank you.
Mr. Kastenmeier. Thank you, Mr. Ciancimino.
400
On page 2, you meant rather than 1957, 18 years of inflationary
erosion concerning the House copyright revision bill, yoh meant 1967,
8 years ?
Mr. CiANCiMiNo. No, I did not, Mr. Chairman. It goes as far back
as 1957, and I think the first mention of $8 as the fee is contained in
1957.
Mr. ELiSTENMEIER. 1957?
Mr. CiANciMiNO. Yes, Mr. Chairman.
Mr. Kastenmeier. Mr. Chapin, you mentioned that today BMI
authors and other authors get a performance royalty on French juke-
boxes. How is that computed, how is that arrived at, what formula
do the French employ, as an example? Do you happen to know?
Mr. Chapin. I think it is on a per box fee, and I might add that the
rates vary anywhere from $60 to $80 per box, so that we are talking
about a much higher rate than is being considered here.
Mr. Kastenmeier. Mr. Korman, if tlie present bill were enacted into
law, by what percentage would the total revenues of authors and com-
posers represented by the three performance rights societies be more
or less increased by virtue of the $8 a box royalty, if any ?
Mr. Korman. Mr. Chairman, that is hard to say. It appears, if you
assume 500,000 jukeboxes in use, which is the number mentioned in
September 1974 when the Senate was debating this question
Mr. Kastenmeier. I am willing to assume the $4 million a year
figure mentioned by Mr. Copland.
Mr. Korman. Well, at $4 million, the question would be what would
be involved in collecting it and how much would it cost to distribute it?
That is to say, if this money is to be paid to the Copyright Office,
assuming it just funnels through that Office, ASCAP, BMI, and
SESAC, for example, under the antitrust provisions in the section, if
they can agree quickly among themselves how that should be split
that would be one thing. I think ASCAP's gross revenues are approxi-
mately $80 million per year. I believe BMI, which in its statement
describes itself as the world's largest performing rights society, col-
lects about between $40 and $50 million a year. Mr. Chapin can, I am
sure, furnish the figure. As to SESAC, Mr. Ciancimino knows I am
sure that it is a couple of million dollars. On the arithmetic, that is $4
million added to that total of approximately $130 million. It is not a
very, very large sum of money, Mr. Chairman. But this problem is a
probletn philosophically and it does create problems for us as we have
said on the international scene. Foreign societies try to work special
arrangements in their contracts with us because they say you do not
collect on jukeboxes and w^e pay you for those uses. And frankly,
Mr. Chairman, I do not know what the cost of distribution to composers
and authors would be.
Mr. Mercer's statement says that we do not have current hard data,
so that we really cannot propose a reasonable fee. We do not know what
it ought to be. But we do think we ought to sit down with these people
and find out what it should be.
It is simply incredible to me that a business which generates a half
a billion dollars a, year, selling nothing but performances of music,
and incidentally, they do not pay anything, the record manufacturer
pays the record royalty, the mechanical fee for the right to manufacture
the records, that is not paid by the jukebox industry. Sure, some of the
money flows to the composers because they buy the records.
401
On the other hand, they also resell a lot of those records, and I do
not know how you quite weigh that. They sell their records, they are
not all, by any means, worn out when tliey leave the jukeboxes, and
they resell them as used records. But the economics of this data really
have not been submitted and we say that we do not know what a fair
fee should be. But we would like to hnd out.
Once they are obligated to pay it is my conviction that a fair agree-
ment will be worked out.
Mr. Kastenmeier. Let me ask you this, Mr. Korman, if a tribunal
were provided for in the statute as the Senate conunittee provided, and
realizing the music operators are businessmen who want to know with
as much precision as possible what the liability would be, the tribunal
would tend to open end that. They could not rely on the $8 a year or
any other figure as of July 1, 1977. What would happen? Up to that
point, it would have been $8, and at that point I assume the perform-
ance rights societies would make a proposal to raise the amount to
X number of dollars, maybe $10 or $11, and if that is not agreed to,
it would be submitted to the Register of Copyrights, who would submit
it to the royalty tribunal under section 801. And what would be the
allegations, and how would the determination be made as to what
annual rate would thereafter be charged ?
Mr. KoRMAN. Mr. Chairman, I do not think anyone knows precisely
what the answers to those questions are. I think this : that under this
bill, the act w^ould become effective on January 1, 1977.
Mr. Kastenmeier. Januaiy 1.
Mr. Korman. On July 1, 1977, under section 802(a) the Register of
Copyrights is to cause to be published in the Federal Register notice
of commencement of proceedings for the review of the royalty rate
specified in section 111 and 115, and we would hope that would be
changed to add 116.
Now, the Senate committee report indicates that this is intended to
be a review. This is at page 203. This is intended to be a review of the
rates specified, of all of the statutory rates specified in the act.
Now, the machinery is not spelled out in very great detail, but I
would anticipate, Mr. Chairman, that what would happen is this : We
would sit down with the MO A or some committee of jukebox operators
authorized to speak by the MOA and what we w^ould do, as in the
radio industry, for example, the National Association of Broadcasters,
NAB, appoints a committee to negotiate with us. They advise us,
through their counsel, that they are authorized to represent such and
such stations. With those that are not represented we sign an extension
agreement providing that the licenses be extended subject to retroactive
adjustment when agreement is reached. As I have said, we have never
had to go as far as having a court hearing on the merits.
Here I think we would try to sit down with an MOA committee
and try to work something out, because as the chairman points out, it
would be quite a risk for the MOA to go into arbitration on the $8 fee
if they can work out a deal that they can agree is reasonable. And there
would be a risk. They would know more about it then than we do be-
cause they know what the profits are. For example, they said they oper-
ate several businesses. They put it in terms of not being able to survive
economically operating only the jukebox part of their business. I do
not know whether that is true or not.
402
But, you get the problems of different businesses getting mixed up
in one operation, or trying to separate out wliat is really the protit from
jukebox aspects of the business.
Mr. Kastenmeier. Let me say that that is an important revelation,
because if the criterion is profits of the jukebox industry, that is one
thing. If it is, as has been alluded to by some of the other witnesses,
cost of living, or erosion over a period of time and the value of a set
amount, fixed at a figure, that is quite something else.
Mr. KoRMAN. It is not profits in any other area, Mr. Chairman, it is
the value of the right. But you see, in all other areas you have a history.
The radio industry was paying at one time, the local radio stations were
paying ASCAP 2i/4 percent, from 1941 through 1958, and they came in
with a committee of the NAB, and they petitioned the court to reduce
the rates. And they said we have been hit, and this was in 1959, by the
full impact of television, and the recession of the fifties, and they said
we ought to get a rate reduction. And anyway, ASCAP is doing very
well with their new^ television incomes. And we sat around the table and
we worked out a reduction from 2i/4 to 2% percent, and agreed on ways
to resolve some of the accounting problems.
Incidentally, the history in radio has been that the rates have gone
down. The ASCAP rate is now 1.725 percent, and it was not too long
ago it was 214 percent. And this provision, Mr. Chairman, does not just
provide for the rates to be increased. If the jukebox industry can come
in and show that they are hurting, and $8 is too much, they can get the
rates reduced. We think they put up such a fuss, frankly, because they
are concerned that a fairminded arbitration panel would come up with
a higher figure. We think they would too, and Ave think they should if
that is what the facts justify.
Now, you say on what basis. Not profitability, but fair return com-
pared to other things. What do ASCAP, BMI, and Sesac charge when
they license a restaurant and the owner buys his records, and plays the
music for the benefit of his patrons and he has to pay a license fee '? And
how does that relate to what he will be charged when the public pays
for the music ?
Mr. Kastenmeier. Thank you. I'm going to yield.
Mr. Drinan. Mr. Chairman '^
Mr. Kastenmeier. The gentleman from Massachusetts.
Mr. Drinan. Just a point of information at this point. Would you
tell us the arrangement with Muzak ?
Mr. KoRMAN. Muzak is a background music service which provides
simultaneous performances, either over leased telephone wires or by
means of a subchannel of the FM broadcast, to subscribers w4io pay
Muzak a fee. Under one agreement we grant Muzak locally — it is a
franchised operation, they have Muzak operators, let us say, in Boston
and New York and so forth, and ASCAP has one agreement, and the
same is true I believe for BMI and SESAC, they each have one
agreement with each Muzak operator wdiich authorizes the Muzak
operator to license each subscriber. And in turn, the license fee paid
for that license for the subscriber varies. They may be factories, doc-
tors' offices, barbershops, restaurants, all kinds of users. The way the
ASCAP agreement works, if it is wliat we call an industrial type of
premises, a place that ASCAP representatives would not themselves
find — an office or factory, which the public is not admitted to it, the
403
fee is 31/^ percent of what the subscriber pays to Muzak. If it is a
public type of phice, sucli as a restaurant or shop, the hist agreement
was $27 per year, but a special and lower rate exists for shopping
centers where the first unit was $27 and additional units were $15 each.
But those rates are now subject to one of these court proceedings where
we have not moved for several years. We do not try to make these ex-
pensive ; in fact, we try to keep them cheap, and they are cheap. We
have not moved for several years, and Mr. Patterson can confirm this,
he represents the Seeburg people who have a background music service,
because of the case that was brought testing the question of whether
the old Buck v. Jewell LaSalle Realty Co. is still good law, and the
Muzak operators say that they suffer competition from the people who
install their own radios, and then hook up loudspeakers and play music
in that fashion. Muzak says since they (the radio users) do not have to
pay and since the cable cases were decided by the Supreme Court; if
they do not have to pay and Muzak does, the ASCAP fee for Muzak
should be reduced. We do not agree. But prior to asking the judge to
decide whether Muzak's argument is relevant, we have agreed to hold
off the Muzak and Seeburg proceedings until the Supreme Court de-
cides the case that was argued last April, 20th Century Music Co. v.
Aiken.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson. I have just a few questions. As to ASCAP, BMI and
SESAC, it is my understanding that these are at least similar organi-
zations. Am I right or wrong on that ?
Mr. CiANCiMiNO. That is correct, Mr. Danielson.
Mr. KoRMAN. That depends on what you mean by similar, but for
this purpose, yes.
Mr. Danielson. I am not interested in splitting hairs. Some of
you are not engaged in packing corned beef, but you are all engaged
in licensing the performance of musical composition, is that correct?
Mr. CiANCiMiNO. That is correct.
Mr. KoRMAN. Yes.
Mr. Chapin. Yes.
Mr. Danielson. Would the $8 per machine, and I know none of you
agree with that, but I have got to have something to talk about, with
the $8 per machine per year fee be payable to each of the three, ASCAP,
B?,II and SESAC, or is it to some of them or is there one fee to all of
them, and in the latter event, which I think is probably true, because
I see a nodding of a very knowledgeable head in the background, then
I would like to know what kind of an arrangement do you have to
divideup that fee?
Mr. Korman. We have never had the pleasure of having to make
such an arrangement liecause we have never collected the fee.
Mr. Danielson. I will stipulate to that now, but now if you can
tell me how you would do it I would appreciate it.
]VIr. KoR^iAN. Well, if I may first, Mr. Danielson, what we would do
I think is to have a survey made, on a sample basis, because there are
so many performances going on all the time by so many jukeboxes,
and we would try to reach an agreement among ourselves as to what
share each of the three organizations is entitled to based on what is
being used in the jukeboxes.
Mr. Danielson. I see. Can a writer of music, a performer for the
record, can he belong to more than one of these three organizations?
404
Mr. KoRMAN. You say a performer, and you are speaking of a com-
poser or an author of lyrics at this point, not the person who performs
unless he also writes the work.
Mr. Danielson. We had one excellent presentation from Sy Oliver,
and in two and a half pages he got right down to the nuts of it.
Let me ask you this: Does Mr. Oliver belong to more than one of
three?
Mr. Oliver. No. I belong to BMI.
Mr. Danielson. So your compositions would be handled through
BMI and not through the others ^
Mr. Oliver. That is right.
Mr. CiANCiMiNO. Mr. Danielson, if I may ?
Mr. Danielson. Sure.
Mr. Ciacimino. The writer only belongs to one of the three organiza-
tions. Each of the three organizations represents their own repertoire
of music and a writer cannot belong to more than one, because then it
would result in certain crossover rights, and duplication of rights.
So generally if a writer is affiliated with BMI, all of the music he com-
poses is represented imder this agreement with BMI, through BMI,
and the same holds true for ASCAP and SESAC.
Mr. Danielson. Now, if BMI had granted a license to some public
place where a performance was had, that licensee could utilize the BMI
family or repertoire ?
Mr. Ciancimino. That is correct.
Mr. Danielson. Would that licensee probably also have a license
from ASCAP?
Mr. Ciancimino. I think maybe I might be able to take a shortcut
here, Mr. Danielson. Any user of music on a substantial basis will nor-
mally have agreements with the three performing rights organizations.
This means whatever music he utilizes, he is pretty confident that this
music will be covered under one of the three licenses, so that in the
main he is licensed to perfomi just about any piece of music that is
written today.
Mr. Danielson. Now then, in the event that a jukebox operator, be-
cause really that is the thrust of the presentation today, jukeboxes, and
the event a jukebox operator were brought under the law, it would
seem highly probable that he would listen to all three organizations.
Mr. Ciancimino. Yes. The way the present bill reads he would pay
his $8 into a central area; namely, the Register of Copyrights or to
some other designated agency and that $8 would be for all of the music
that he would use on that box for 1 year. And the $8, as Mr. Korniiin
alluded to before, would either be divided on a voluntai'y basis between
the three organizations, or upon failure to reach an agreement there
would probably be some kind of determination that would have to be
made.
Mr. Danielson. But it would not be in the licensee that would deter-
mine what the allocation would be ?
Mr. Ciancimino. Tliat is correct.
Mr. Danielson. He would simply buy his three licenses?
Mr. Korman. One license.
Mr. Ciancimino. One license with the $8 being distributed among
the three performing rights organizations.
Mr. DanieIjSON. I see. One question only remaining. I believe in Mr.
Copland's statement he said something to the effect that there were
405
500,000 jukeboxes in operation in 1968. And I think Mr. King's state-
ment showed something like 750,000 in operation currently. Is that
about the correct figure ?
Mr. Chapin. Yes ; so far as we know.
Mr. Danielson. OK. Thank you very much.
Mr. Kastenmeier, The gentleman from Massachusetts, Mr. Drinan.
Mr. Drinan. Thank you, Mr. Chairman.
In Mr. King's statement it is stated here that when an American
song is played on a French jukebox the American composer is paid
for the performance. Would somebody want to respond on how much he
is paid, and how is this done?
Mr. ICastenmeier. I asked Mr. Chapin that.
Mr. Chapin. Yes. I had said that in the foreign countries the jukebox
rate, and I am quoting here from an article in Variety where it says
depending upon the country it ranges from $50 to $250 annually.
Mr. Drinan. Is that then pursuant to copyright law, or international
law ? Tell me the mechanics of how that is done, and who establishes
the rate and so forth ?
Mr. Chapin. Well, it would be a rate between the performing rights
society in that countiy that would be worked out by agreement with
the local user.
Mr. Drinan. Is there any usefulness in pursuing the legal machin-
ery by which they do it and try to say that if virtually all other na-
tions, I take it, or many nations do that, that the United States also
should do it ? I mean, do you people support that argument that we
should internationalize copyright insofar as possible? More and more
American music is being played all across the world, and can we learn
something, in other w^ords, from the example of foreign nations ?
Mr. Chapin. Well, yes. And I think most of the people here today
have pointed to this inequity where the foreign people get compen-
sated, but there is no compensation here in the United States.
Mr. CiANCiMiNO. If I might add, further, I think we also might
learn, I w^ould hope, from the situation which exists in most European
countries where the fee that is negotiated is paid directly to the per-
forming rights organization, and there is no dilution of fees through
any kind of tribunal or agency that would be required to dispense it.
Mr. Drinan. Well, that fee is not set by copyright statute in the
foreign country?
Mr. CiANCiMiNO. No ; this is done by negotiation, but in most of the
countries the performing rights organizations are either to some ex-
tent controlled by the government or very heavily regulated by the
government. But again, the moneys go directly from the user to the
performing rights organization.
Mr. Drinan. Thank you. Another question, anticipating the testi-
mony later on of Russell Mawdsley of the Music Operators, he suggests
something on page 6, that they oppose any fee for registration of juke-
boxes. Is that a real possibility, that somebody propose that there be
registration of jukeboxes?
Mr. KoRMAN. That was in the bill. It is in the Senate bill I think,
and they want to amend it and take it out. Their foot slipped when they
were getting themselves out from within the tribunal.
Mr. Drtnan. Would you people react to it?
Mr. Korman. Well, what it means is that this $4 million they would
pay in gets distributed after the Copyright Office takes off the cost of
406
administering the money, and this. 50 cents as I understand it, was
supposed to represent pait of the handling cost. So really the question
is who bears that 50 cent per machine cost^ the jukebox people or the
composer.
Frankly, I had not focused on it. It seems to me that we have stayed
by the $8, and I do not remember how the history of the 50 cents thing,
how that got in there. Now, Mr. Chairman, I wish Mr. Finkelstein were
here because he has a marvelous recall on these things, but it does make
a 50 cents difference on a machine, and either the jukebox people or
the composers pay it.
Father Drinan, going back to 1965, there were hearings, and on page
200 of part 1 of the hearings held by this committee there is a reference
to the amounts that are paid abroad. This is a jukebox source, a Bill-
board article quoting Mr. Gordon, who then was the head of the See-
burg Corp., Jack Gordon, president of Seeburg Corp. This is a reprint
from a stoiy in Billboard of May 15, 1965. Mr. Gordon is quoted as
saying :
Jukebox operators do pay performance royalties in other countries, with French
operators shelling out up to $480 per year per machine, British operators getting
hit with up to $300 per year i>er machine and German operators being tapped up
to $300 per year per machine.
This was an article attempting to stir up support for the jukebox
fight by pointing out how much it might cost if that bill went through.
Compare those numbers in the hundreds of dollars with the $8 we are
willing to accept. And, Mr. Chairman, in tenns of your question be-
fore expressing concern about how a fair fee would be determined by
an arbitrator or panel of arbitrators which could be $300 or $400 per
year, and would that drive the jukebox industry out of business? I do
not think that arbitrators operate that way. They would know the econ-
omic impact of the fee. And while profit as such would not be their
test, they surely would not fix a fee which would drive anyone out
of business. The world just does not work that way.
Mr. Drinan. Thank you very much. I have no further questions at
this time.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
Mr. Pattison. I am just interested in one aspect of this. With the ra-
dio stations each of your organizations will have an agreement with a
particular radio station, is that right ? And you do not charge on a per
time use of the music, or do you ?
Mr. Korman. No.
Mr. ClANOIMINO. No.
Mr. Pattison. It is a percentage of their gross ?
Mr. Korman. Essentially, Mr. Pattison, it works this way: it is a
net, it is a percentage of a net figure, and it works out to be for the local
radio stations, ASCAP, BMI and SESAC taken together I think some-
thing like probably two to two and a half percent of their gross.
Mr. Pattison. If they play the Tennessee Waltz all day long, it comes
out the same?
Mr. Korman. That is right. They get the right to perform any musi-
cal composition in any of the three repeitoires under their license as
ott^n as they choose. They do not have to keep records of what they
are playing. They just pay the one stipulated fee.
Now, for those stations that might be mostly talk, for example, just
some musical programs, there is available a form of license called a
407
"per program" license where the fee is also a percentage. It is a higher
percentage. For ASCAP it is 8 percent of the amount paid by adver-
tisere just for those programs containing one or more selections in the
xiSCAP repertoire. If they only use JiMl compositions, and they
have a BMi blanket license they would not pay aSCAP anything —
if they had an ASCAP per program license — on musical programs not
using A 8 CAP music.
Mr. Pattison. Then internally ASCAP, BMI and SESAC work
out their arrangements with their own composers on a survey kind of
basis ?
Mr. KoRMAN. You know that is even a tougher problem than col-
lecting the money — is how you divide it up fairly.
Mr. CiANciMiNo. I would like to add that SESAC does not charge
radio stations on a percentage basis. We have a flat-fee basis, and we
use a station's power, their hours of operation and the market area,
among other factors, and we arrive at a flat annual fee. But the license
generally selected by the radio station is the blanket license, which for
the one annual fee gives the station the right to perform any one or
thousands of works in the SESAC repertoire. They do have available
an alternate kind of licensing arrangement which we call a per-play
or per-piece or per-use, but this is just not economically feasible to the
user, at least they have not found it so.
Mr. Pattison. The record keeping?
Mr. CiANCiMiNO. Yes. Yes. So that the cheapest and most economi-
cal method historically has been the blanket license, and for the one
blanket fee they liave the right to use all of the music, and then we in
turn, based on chart music, and based on performances in our own
three separate, individual formulas, distribute these moneys to our
respective affiliates.
Mr. Pattison. So analogizing the radio station, for instance, to a
jukebox why would it not be a sensible way to do it on the same basis,
in other words ?
Mr. KoRMAN. A percentage in the case of ASCAP it would be
marvelous. But it would also be expensive to operate that way. I say
"marvelous" but it would depend, obviously on what the percentage
was. If you worked out a fair percentage, the percentage notion has a
lot of pluses. For one thing, it adjusts automatically for inflation. For
another thing, if a fellow's business goes down his fees are reduced,
and that is fair, you know to the extent that the value is less. The value
of the license may be less to him.
Mr. Pattison. I am thinking of the difference between the jukebox
in the little grill somewhere tliat does not get much use and the one
that is being used all the time in a big operation. I am thinking of the
difference of the small grill operator who gets some play Friday nights
and does not get much normally, and then the other operation that
has got jukeboxes, master jukeljox and all kinds of boxes all over the
place and really that thing works all of the time.
Mr. KoRMAN. Where you have a percentage contract, a percentage
license, you must have a provision for an audit, because the licensee
has the information solely in his possession on which the fee is based,
and you cannot afford to fret into a percentage way of dealing and
auditing when you are talking about very low fees. You just cannot
afford to do it. We license the average small restaurant, for example,
408
where the fellow has his own record or tape machine, rather than sub-
scribing to a background music service, for about $70 a year. It used to
be $60 and I think we just raised it $70. It was $60 since 1914. When
ASCAP was formed, the original rate was $5 per month under the
first licenses.
Mr, Pattison. I have no further questions.
Mr. Kastenivieler. Do any of my colleagues have any further
questions ?
Mr. Danielson. I have a question.
Mr. Kastenmeier. Yes. Let me just ask whether Mr. Mann or Mr.
Mazzoli have questions ?
Mr. Mazzoli. Mr. Chairman, I have just a couple of fairly brief ones
just to sort of fill me in. An individual who has a grill, and who buys
himself a stereo set and who buys some tapes at the local discount
house still has to have a contract with the three agencies; is that
correct ?
Mr. KoRMAN. Yes. It is anomalous that if he just puts in his own
things, and pays himself for all the costs involved and furnishes the
music, then he needs a license under the present law. But, if he brings
in a jukebox and has the public put coins in it, in which he shares — he
may get 40 or 50 percent of the gross taken in by the jukebox — that
is not deemed to be a public performance for profit ; therefore, he does
not need a license.
Mr. Mazzoli. You say you do not have any figures on the amount, ac-
curate as to the number of machines extant throughout the country ?
Mr. KoRMAN. I have not got any idea.
Mr. Mazzoli. 750,000 seems very low. Now when you calculate the
number of machines, would that be an individual box station or would
that be a master control ?
Mr. KoRMAN. They were talking about the master control.
Mr. Mazzoli. And for an artist like Neil Diamond or John Denver
who write, compose, orchestrate and perform, do they belong to one
of your organizations ?
Mr. KoRMAN. You have mentioned a number of ASCAP members.
Mr. Mazzoli. Those names just came to mind. Can they perform
music from the repertoire of BMI or SESAC ?
Mr. CiANCiMiNO. Yes they can. A performer can perform any piece
of music he desires, and the burden is on the one in the establishment
where he is performing to have the clearance. That is the primary
burden. But he can perform or record anything he wishes to.
Mr. Mazzoli. And when he creates music, it comes within the
repertoire of the agency he represents? Now, if he moves — Mr. Oliver,
have you ever moved from BMI, or have you been with them from the
beginning of your career ?
Mr- Oliver. Yes.
Mr. Mazzoli. Do you have the privilege of moving to ASCAP or
SESAC?
Mr. Oliver. I could I suppose.
Mr. Mazzoli. If so, what happens to your music ?
Mr. Oliver. My music, of course, is controlled by my agents, and
the details of the copyright are handled by the publisher, and I do not
know the laws pertaining to the situation you suggested.
Mr. Mazzoli. Apparently it does not happen often-
409
Mr. CiANCiMiNO. Yes; it does happen quite often. Insofar as a
writer terminating agreements with one organization and going to
another organization, it does liappen. And, in our case, our policy is
that we would terminate any rights that we have in the writer, any
carryover rights, and we would allow him to be represented fully by
the second performing rights society.
]Mr. KoRMAx. ASCAP members have a right to resign at the end
of every year.
Mr. Mazzolt. And their music can stay with them ?
Islr. KoRMAX. Either way, as they prefer.
Mr. Mazzoli. Let me ask one final question to sort of fill in the
gaps here. Using Mr. Oliver, and perhaps Mr. Copland and Mr. Davis,
you pay some amount per year to belong to the agencies ?
]Mr. koRMAx. $10 in ASCAP's case, per year.
Mr. CiAxciMixo. Nothing for SESAC.
Mr. Mazzoli. BMI?
Mr.CnAPix. Nothing for BMI.
Mv. INIazzoli. Is it the case, then, tliat anybody that works harder
in the year is going to get back more in the distribution of money?
Mr. koRMAX. It is not a function of how hard you work. It is a func-
tion of how talented you are or how successful you are.
ASCAP must accept anyone to membership who applies and has
liad a single work either published or recorded. We must under our
consent decree. The Government's theory being that you cannot pos-
sibly be a success unless you are in one of the performing rights licens-
ing organizations or another. They have chosen to compel ASCAP to
accept anyone who applies and who meets this minimal test.
Mr. CiAxciMixo. Insofar as SESAC is concerned, since we do not
charge any membership fee, the worst the member can do is die.
Afv. Mazzoli. Thank you very much.
Thank you, Mr. Chairman.
]Mr. Daxielsox. I have one remaining question.
In the case of radio stations, would a single radio station acquire a
license from each of the three organizations ?
Mr. CiAxciMixo. That is correct, yes.
Mr. Daxielsox. "Would he pay each
]Mr. CiAXCiMixo. Separately.
Mr. Daxielsox. To each of the three separately.
What we were contemplating, hypothetically, was in the case of a
jukebox.
Mr. CiAxciMixo. It would be a different payout arrangement.
]Mr. Daxielsox. To some common recipient ?
Mr. CiAxcnrixo. That is correct.
Mr. Daxielsox. Thank you.
Mr. Kastexmeier. Mr. Mann, any questions ?
Mr. Maxx. No, thank vou. Mr. Chairman.
^Ir. Kastexmeier. If not, the Chair, on behalf of the committee,
would like to thank our witnesses this morning. Mr. Davis, Mr. Oliver,
Mr. Copland, Mr. Ciancimino. Mr. Chapin, and Mr. Korman, for their
contribution in this particular area. Perhaps you will have occasion
to testify on another aspect of the copja-ight law in the future.
]Mr. Ctaxcijeixo. Thank you.
Mr. KoRMAX. We welcome the opportunity, Mr. Chairman. ^
57-78G— 7G — pt. 1 27
410
Mr. Chapin". Thank you, Mr. Chairman.
Mr. Kastenmeier. Next the Chair would like to call witnesses rep-
resenting the Music Operators of America and also the manufacturers
of jukeboxes, the manufacturing companies. I would like to ask my
colleague on the Judiciary Committee, the gentleman from South
Carolina, Mr. Mann, if he would care on our behalf, to greet the presi-
dent, the national president of the Music Operators of America, Fred
Collins.
Mr. Mann. Mr. Collins, will you come up and bring your asso-
ciates, too ?
Mr. Kastenmeier. Mr. Mawdslej' and Mr. Allen and Mr. Patterson,
would you all come forward ?
Mr. Mann. Thank you, Mr. Chairman.
The youngest one in that crowd is Fred Collins, Jr., who, in spite
of his youth, has been in the music box business for over 20 yeai*s. lie
broke his teeth on it, I thinlv. He is a dynamic community involved
man, who, because of his involvement in community activities, and
associated activities of the jukebox industry, because of his interest
in its ethical standards and its public image and the dignity of it, has
involved himself to the point that at his young age he is now president
of that organization.
He happens to be an old friend and client of mine from Greenville,
S.C., and we have maintained our friendship down over the years.
He will present to the committee those who are with him and those
who are to make the primary statements on behalf of the music
operators.
Mr. Collins.
TESTIMONY OF FRED COLLINS, JR., PRESIDENT, MUSIC OPERATORS
OF AMERICA
Mr. Collins. Thank you, Mr. Chairman.
I would like to introduce on the far end JNIr. Perry Pattei'son, who is
counsel for the jukebox manufacturers. Next to him is Ted Nichols
from Nebraska, who is the secretary of the JNIusic Operator of Amer-
ica this year. And then next is Mr. Nicholas Allen, our counsel here in
Washington with MOA. Next to me is the immediate past president
of the Music Operatoi-s of America, and he is also the chairman of
our legislative committee this year, from Massachusetts, Russ Mawds-
ley. On my left is Mr. Garland Garrett, the treasurer of the Music
Operators of America from Wilmington, N.C.
We all do not have prepared statements, but we would be glad to
answer any questions that you, jNIr. Chairman, or the committee might
have after Mr. Mawdsley reads our position statement. Thank you.
Mr. IvASTENMEiER. Thank you.
Before getting to Mr. Mawdsley, I understand Mr. IMawdsley will
make a presentation on behalf of the Music Operators of America, and
perhaps aided by Mr. Allen. And then, Mr. Patterson, you have a
statement, do you not ?
Mr. Patterson. I have, yes.
Mr. Kastenmeier. In which case we will hear from Mr. Patterson.
The Chair recalls that Mr. Nicholas Allen and Mr. Perry Patterson
testified 10 years ago on behalf of their organizations and are well
411
known to this committee. Ten years ago I had the pleasure that Mr.
Mann had today. As I recall, there was the retiring president from the
west coast, from the Bay area, Mr. George Miller, and he was replaced
by C. W. Pierce, who was from my district and was a constituent of
mine from Green County, Wis. Mr. Pierce, I guess, has long since
ceased to be a national president, but I am sure he is still interested in
your organization.
Mr. Allen. He sent his greetings to you, Mr. Chairman, and enlisted
your sympathetic ear.
Mr. I^STENMEiER. Mr. Mawdsley, you may proceed.
Mr. Mawdsley. With your permission, may I defer to Mr. Patter-
son, who has an appointment, and may he go on first, please ?
Mr. Kastenmeler. Yes, indeed.
Mr. Patterson.
TESTIMONY OF PERRY S. PATTERSON, COUNSEL, ROCK-OLA MANU-
FACTURING CORP., ROWE INTERNATIONAL, AND SEEBURG, INC.
Mr. Patterson. Thank you, Mr. Chairman.
Mr. Chairman, and members of the subcommittee, my name is
Perry S. Patterson, and I presently reside in Coudersport, Pa. I am
a member of the District of Columbia bar as well as the Pennsylvania
bar, but I am a retired partner in the Washington and Chicago firm
of Kirkland, Ellis, and Rowe, and that firm, through other partners
than myself, have represented the Rock-Ola Manufacturing Corp.
and the Seeburg Corp. and Rowe International, which are the only
surviving jukebox manufacturers in the country, for going on at least
40 years.
I am here to reflect the manufacturers' unqualified support of the
$8 annual fee, and this was the provision, of course, which was ap-
proved by this committee and passed by the House in 1967, and then
again embodied in the Senate version as passed last year in precisely
this same form. In its present form it is acceptable to the manufac-
turers, and we urge approval.
Now, my last appearance, as the chairman noted, was in 1966, and
the composition of the subcommittee has changed, with the exception
of the chairman and Mr. Fuchs. i,
There have been just innumerable hearings on this subiect going
back to the Vestal bill, which was introduced in 1926 to repeal the copy-
right exemption. And, there is voluminous testimony, quite incon-
sistent with the representations by the performing rights societies that
coin-operated machines did not exist in significance. And, in this con-
nection, without belaboring the history of the matter, in hearings in
1952 by Mr. David Rockola, quoting a spokesman for the authors
copyright league, cites the existence of an extensive coin-operated
business between 1905 and 1909. 1 mean, there were coin-operated xylo-
phones, player pianos, phonograplis, banjos, and even talking pictures.
But, in these hearings in which Mr. Rockola, who is a real person,
testified on H.R. 5473, there is ample documentation that Congress
was aware of the existence of a coin-operated machine, coin-operated
machine industry when it did enact the exemption of the coin-oper-
ated machines. They did not speak in terms of automatic phono-
graphs, but in terms of a variety of coin-operated machines.
412
One of the objectives in the protracted negotiations by which we
arrived at the $8 annual rate was to insulate the operators, and here
again, speaking for the manufacturers, they obviously are not going to
pay the annual fee directly. Their concern is with the economic impli-
cations of what annual fee the operators may have to pay.
In that connection, Ave had extended negotiations with the repre-
sentatives of the performing rights societies, the Eegister of Copy-
rights, representatives of the manufacturers, and did come up with
the $8 annual fee.
And, again in hearings before the Senate subcommittee, we did per-
suade the committee that this was a valid approach, and the utilization
of the Office of Copja-ights as a vehicle for distribution of the fees was
equitable and reasonable as a substitute for direct negotiations on
behalf of the operators with each of the performing rights societies.
Obviously as the testimony on behalf of the performing rights socie-
ties has indicated, they feel that the 1967 $8 rate is too low, and they
oppose the insulation of reconsideration of that rate by the copyright
tribunal.
Now, tlie manufacturers feel that the $8 rate, and here again, the
three manufacturers whom I have canvassed tell me that their best in-
formation is that there are between 450,000 and 500,000 boxes in the
country at the present time, they achdse the the urban renewal pro-
grams have eliminated an awful lot of neighborhood taverns and res-
taurants. The interstate highway systems have insulated countless
taverns from traffic patterns and patronage, so their business has not
really enlarged. And in this connection, the first time I was here, let's
say 20 years ago when I first was an associate in my firm participating
in these hearings, I think there were 10 manufacturei-s of jukeboxes,
and today there are 3.
Last year the Wurlitzer Corporation, which had been in existence,
I think, since around — well, for 118 years — went out of the jukebox
business. And, in their annual report to shareholders, they stated :
In onr coin-operated phonograph business, operating losses were sustained both
in U.S. and some foreign subsidiaries due to steady rising costs, limited market
growtli, heavy investment in all areas, and high interest rates. As a result of the
current situation as well as poor future prosiJects in the domestic market for this
product, the board of directors of "Wurlitzer, on March 5, decided to sell or liqui-
date the coin-operated segment of the company's business in the United States,
and to close all branches of Wurlitzer Distributing Corporation.
And, in a press release on that same date, again the chairman of the
company said that the company had sustained an operating loss of $7
million and concluded for business purposes to get out of the business.
The three remaining manufacturers are highly competitive, and
they have provided me with information on the understanding that
individual company figures would not be set on the record. The three
remaining manufacturers advise me that in the aggregate, dollar sales
volume and unit production is down between 20 and 30 percent. Em-
ployment is down drastically in all of tlie companies, in one particular,
from 1,450 employees to 450. One of the other manufacturers has shut
down its jukebox production from April to date. And, I am advised
that their distributors' inventories are up to 300 percent and not mov-
ing. Tn other words, the jukebox business has not kept pace with
population growth.
413
As I previously advised you, there are fewer jukeboxes in operation
in this country by the manufacturers' estimate than there were in the
years immediately succeeding World War II.
Now, in Mr. Mawdsley's testimony, I know he is going to detail the
monetary contribution of the industry, the operators to the composers
and artists, which historically, again, record after record will show,
has not been negligible by any means.
In summary I note that no mention was made in the testimony of the
performing artists, representatives of the performing societies, rela-
tive to the performing artists royalty, although there is a bill before
this committee, and Senator Scott has introduced a bill to establish
again this, what we feel is a rather anomalous utilization of the copy-
right law, that it would add to the $8, $1 a year to be paid to the Reg-
ister of Copyrights, of which 50 percent would go to the perfonning
artist, such as Al Hirt or Helen Eeddy, and 50 percent would go, half
of it, 50 cents would go to the record manufacturers.
As I note in my statement, I think this really is an anomalous exten-
sion of the whole concept of paragraph 8 of the Constitution, which
states that its purpose was :
To promote the progress of science and useful arts by securing for limited times
to authors and inventors the exclusive right to their respective writings and
discoveries.
To use the copyright clause of the Constitution as a vehicle for pay-
ment of royalties to record companies or to artists, because of their
talents, which they are compensated for in any event, we feel is an
abuse of the constitutional concept of copyright.
In this connection, I just noted recently that the November 19T-i is-
sue of the George Washington Law Review, has an 80-page article on
the public performance right in recordings, and at the end, in sum-
mary, they conclude that they do not feel that it would be in the best
economic interest of the industry to establish a new public performance
right, and conclude that it would not be a desirable element in the gen-
eral copyright revision.
I would commend — and I know Mr. Fuchs is familiar with the arti-
cle, but it is an in-depth analysis of the implications of this problem.
So, in conclusion, we do support the $8 annual fee. We feel that the
operators should not have to be subjected to a copyright tribunal re-
view. The manufacturers, as I have just stated, oppose a performing
artist royalty.
Thank you.
[The prepared statement of Mr. Patterson follows :]
Statement by Pekry S. Patterson on Behalf of Rock-Ola Manufacturing
Corp., The Seeburg Corp. and Rowe International, Inc.
Mr. Chairman and Members of the Subcommittee, my name is Perry S. Pat-
terson. I presently reside in Coudersport, Pennsylvania and appear as counsel
for the Rock-Ola Manufacturing Corporation. The Seeburg Corporation, and Rowe
International, Inc., the only manufacturers of coin operated automatic phono-
graphs in the United States.
I am a member of the District of Columbia, Maryland, Illinois and Pennsyl-
vania bars. I am a retired partner of the Chicago and Washington firm of Kirk-
land, Ellis and Rowe and the foregoing companies, and other manufacturers who
have vanished from the scene, have been represented by partners of my former
firm and by me on copyright legislation matters for at least forty years.
414
I am here to reflect the manufacturers' unqualified support of Section 116 of
H.R. 2223 as now drafted providing for an $8.00 annual royalty per automatic
phonograph. This is the royalty provision originally approved by this Subcom-
mittee in 1967 and enacted by the House in that year in H.R. 2512. It represented
a comlpromise arrived at only after protracted negotiations by the Office of the
Register of Copyrights, The Music Operators of America, the manufacturers and
the representatives of the performing rights societies, ASCAP, BMI and SESAC.
It was in fact the first time that Congress had imposed a performance royalty on
coin operated automatic phonographs.
Section 116 in H.R. 2223 is the same provision passed by the Senate in S. 1361
in September, 1974. In its present form it is wholly acceptable to the automatic
phonograph manufacturers and we urge approval vsithout modification.
My last appearance before this Subcommittee was in 1966 at the time of the
consideration 'of H.R. 2.512. The composition of this Subcommittee has so changed
that the only surviving members of the 1967 Subcommittee are your chairman,
Robert Kastenmeier and staff counsel, Herbert Fuchs, Esquire. For this reason
I feel it relevant to note briefly in the current record some of the historical bacli-
ground of the juke box exemption.
Section 1(e) of the Copyriglit Law of 1909 expressly exempted the public per-
formance of copyrighted works on coin operated machines from the obligation of
making performance royalty payments. This exemption was not a frivolous or
lightly considered action but rather a recognition by Congressional members after
being presented with extensive documentation of the existence of a very substan-
tial coin operated music machine industry that the payment of performance roy-
alties, by the thousands of nickelodeon pianos and music boxes in saloons,
restaurants and hotels would work undue economic hardship on the owners of
such devices.
Representatives of ASCAP i=itated explicitly in the record of the hearings before
this Subcommittee in the 80th Congress on H.R. 1269, H.R. 1270, and H.R. 2.570
that ASCAP had no desire to extract performance royalties from the "little fel-
lows", the little restaurant keepers or ice cream parlors and, that the representa-
tives of ASCAP had instructions not to attempt to collect from the small business-
men even though they claimed they had such a right if they chose to exercise it.
(Record of Hearings on above bills, pages 148-159, incl. ) .
The royalty structure in H.R. 2223 effectively protects the small operators and
little businessmen from direct negotiations with the perfoi-ming rights society.
I will not burden this record by detailed repetition of the history of efforts hy
the performing rights societies to repeal the 1909 exemption other than to say
in brief summary as follows :
In 1926 the Vestal Bill H.R. 10434 was introduced at the initiation of ASCAP
to repeal the juke box exemption and collect royalties from coin operated phono-
graphs. Sineethen, for nearly 50 years legislation has been introduced or pending
in every session of Congress, including the present one. aimed at repealing or
modifying the provision of the 1909 Act exempting coin operated machines from
the performing rights provisions of the law.
Hearings have been held on such bills in the Senate and House on at least
14 separate occasions to say nothing of extensive debates in both the Senate and
House. Subcommittee members interested in the deitailed history of legislative
efforts of the performings rights societies for repeal of the exemption and the suc-
cessful opposition of the operators and manufacturers to such repeal have avail-
able in the files of the Subcommittee, thousands of pages of testimony, statements,
exhibits and reports. T^ey amply document the unwillingness of prior committees
and Congress to accept the argument for repeal.
IThe manufacturers will not, of course, be directly subject to royalty payments
under Section 116 of H.R. 2223. As in the past, the surviving manufacturers are
concerned about the legislation for the basic business reason that the businesses
of their customers, the operators who buy their machines will be significantly
affected bv any increase in the proposed $8.00 annual rate. My clients' concern,
however, is not confined to the $8.00 annual rate in H.R. 2223 as now drafted, but
to three important prospective legislative considerations involving increased
monetary exposure for the operators which are not presently in Section 116 of
H.R. 2223 but which may be introduced by amendment for inclusion in Section
116 before final action on H.R. 2223.
The first anticipated problem affecting Section 116 is the prospect that an
effort will be made to increase the $8.00 annual rate. On November 27, 1974,
Senator McClellan sent a letter to the operators, the manufacturers, and other in-
415
terested parties in whicli he discussed what he thought would be a reasonable
annual rate per phonograph for juke box operator^ to pay. He concluded that in
lieu of the $8.00 rate that consideration be given to an annual rate of $19.70 per
box, per year. Over the years of hearings suggested royalty rates had ranged
from $4.00 annually to $80.00 annually but the apparent sounce for Senator
McClellan's figure was a self-serving resolution passed by the National Licensed
Beverage Association in 1967 in the course of hearings on repeal of the juke bos
exemption Which association or its members would not in any event have been
liable for payment of any royalty.
The second problem involves a provision in the Senate version of the General
Copyright Revision, which, in addition to the $8.00 annual fee, provided for a
Performing Artists Royalty payable by juke boxes at the rate of $1.00 annually
but also payable at much higher rates by the broadcast industry and vigorously
opposed by that industry. Prior to Senate passage, this provision was deleted by
an amendment sponsored by Senator Ervin who expressed grave reservations as
to its Constitutionality. The manufacturers strongly oppose the re-introduction of
this royalty in Section 116.
'Finially, the Senate passed General Copyright Revision while setting an $8.00
annual royalty fee per phonograph did not subject this fee to periodic review by
the Copyright Tribunal established by the bill. The manufacturers favor reten-
tion of this exemption, because it relieves them of inevitable confrontations with
the fterforming rights societies.
In summary, the automatic phonograph manufacturers oppose :
( 1) Any increase in the proposed $8.00 annual rate.
(2) Any attempt to establish a Perfoi-ming Artists Royalty.
(3) Subjection of the $8.00 annual fee to periodic Copyright Tribunal Review.
The PerfoiTuing Artists royalty ignores the fact that the performing artists
and record manufacturei-^ are already compensated for their performing efforts ;
musicians on the basis of union scale, their popularity and bargaining pow^ers.
The Perfonning Artists Royalty, particularly as it compensates manufacturers,
achieves a iresult never conceived by the di^aftsmen of the copyright provision of
the Constitution ; Section 8, Clause S, "To promote the Progress of Science and
the Useful Arts by securing for limited times to Authors and Inventors the ex-
clusive Right to their respective Writing and Discoveries."
Mr. Mawdsley has described the problems faced by the music operators and
their moneitary contribution to the performing rights societies and music industry.
I will direct myself to the plight of the manufacturers. We are not living in
what can be described as normal economic times and there are few industries
that cannot demonstrate declining sales and employment over the past several
years. However, in the case of the automatic phonograph manufacturers, which
numbered about 10 thirty years ago, three now remain. The three companies for
which I speak are Rock-Ola, Seeburg, and Rowe International.
In 1974 the Wurlitzer Coii>oration. which had manufactured musical instru-
ments since 1856 and automatic phonographs since 1908 discontinued the man-
ufacture of automatic phonogi-aphs because of the deteriorating economic climate
in the industry.
I attach as Exliibit A an extract from the 1974 Annual Report of Wurlitzer ex-
plaining its reasons for withdrawal from the automatic phonograph field. Also,
as Exhibit B, a Wurlitzer Press Release on the same subject.
The three surviving manufacturers for whom I speak have not benefited yet
from Wurlitzer's withdrawal from competition. Each company has supplied me
with information concerning their operations but have requested that I consoli-
date such information for reasons of competitive confidentiality.
In the aggregate, dollar sales volume and unit production is down by between
20% and 30%. Employment is down drastically, in one company from 1,4.50 em-
ployees to 450 employees. Another company has shutdown production for three
months. Distributors' inventories in certain instances are as much as 300%
above normal and sales are not improving.
Tlie juke box business has not kept pace with population growth. It is estimated
that there are fewer juke boxes in operation now than in the period 25 years ago
after World War II.
Mr. Mawdsley has detailed the present and prospective monetary contribution
of the industrv'to the record industry and the performing rights societies. Enact-
ment of H.R. 2223 as now drafted will result in a Contribution by the operators
to the music industry of an estimated $8,500,000.00 a year. This is nearly 10% of
416
the total distributions of the performing rights societies ASCAP, BMI and'
SESAO which in 1974 was reported to be apa)roximiately $97.5 million.
The manufacturers believe the operators are contributing their fair share for
their use of music and recommend approval of Section 116 of H.R. 2223 as
drafted. They ojipose any amendments which would expose the operators to addi-
tional monetary burdens.
EXHIBIT A
June 1, 1974.
To THE Shaeeholders of Wuelitzer :
It is interesting to realize that the modern, complex, multi-national Wurlitzer
Company of today was founded 118 years ago in a simple, pastoral setting in
Cincinnati, Ohio. Here a young German named Rudolph Wurlitzer was engaged in
the business of importing musical instruments for a frontier society. The company
he founded thrived, as did the nation, with various members of the Wurlitzer
family active in the management for well over a century. The last surviving sou
of the founder was Farny R. Wurlitzer who died May 6, 1972 after 68 years of
dedicated service.
In the 118 year span of the Company's growth, the steady rise in standards of
living in the countries served by The Wurlitzer Company has provided the public
with time and money to enjoy musical instruments of all types. The Company has
been successful in fulfilling this need and each year has continued to supply the
kinds of instruments most wanted, both in the United States and throughout the
world.
Two major new product lines were established during the year. One was the
highly competitive Sprite organ line supplementing our medium and higher priced
electronic organs. The introduction of the Sprite models to Wurlitzer dealers pro-
duced the largest number of advance orders for a new product in the history of
the Company. Manufacture of a line of low-priced electronic organs including
table models was also initiated during the year for sale through private label
distribution. This product line has excellent growth potential.
Engineering and research activities have continued unabated to achieve inno-
vative products, outstanding styling, and the greatest possible cost savings in
manufacturing. Wide use of electronics in our products has been aided by the
continued application of the new technology of Large Scale Integrated Circuits
(LSI). The Wurlitzer Company was the first in the industry to produce electronic
organs using LSI components.
Manufacturing efficiency has advanced during the years with the continued
trend toward mechanized assembly and test in our factories. Although capital
expenditures are necessarily high for special equipment, the operating cost sav-
ings are substantial. Additional manufacturing capacity resulted from the estab-
lishment of a Central American facility operating on a contract basis. This facility
manufactures certain subassemblies for use in our various plants. The major
Wurlitzer manufacturing activities are conducted at four plants in the United
States and two in Europe, with additional manufacturing or licensed assembly
operations in three locations in Latin America and one in South Africa.
To grow in the musical instrument world market requires the use of a variety
of up-to-date marketing techniques. This year we have successfully brought into
use many techniques in market research, sales training, advertising and pro-
motion, and a variety of other skills necessary for aggressive world-wide oper-
ations. Marketing skills must, of course, be closely coupled with engineering,,
manufacturing, and financial activities of the highest order to achieve the overall
forward thrust of growth for which the Company has been noted in recent years.
Our U.S. marketing operations for keyboard products consist of over eight
hundred independent Wurlitzer music dealers and forty-seven Company owned
retail music stores. Foreign marketing operations are handled by seven Company
owned marketing subsidiaries as well as a large number of worldwide indepen-
dent music dealers and phonograph and vending equipment distributors. This
marketing organization grew in strength and breadth during the year, bringing
fine Wurlitzer products to new markets.
REVIEW OF OPERATIONS
In the year ended March 31, 1974, The Wurlitzer Company achieved the highest
level of consolidated sales in its 118 year history. Major achievements were
also made in strengthening the Company for future growth and earnings through
progress in technology, manufacturing, and marketing.
417
Dnringr the year engineering and research programs brought into being new
competitive models in our pianos, key and action products, electronic pianos, elec-
tronic organs, and coin-operated products. Research programs in progress promise
further important advances for the future. Manufacturing capability has been
improved in all of our U.S. plants through the introduction of new methods and
specially developed machinery. Manufacturing operations were started at the
new Wurlitzer plant in Levern, Germany and a subas-sembly manufacturing op-
eration was started with an associate firm in Guatenmla, C.A. Final steps in the
closing of the manufacturing plant at DeKalb, Illinois were completed early in
the year, and manufacturing operations at Logan, Utah are improving steadily.
Marketing operations have been strengthened by careful training and assignment
of skilled personnel at both wholesale and retail levels. At Cheshire. England a
new sales office and warehouse building was completed at the Parkgate Industrial
Estate for Wurlitzer Limited, our sub.sidiary for keyboard product sales in Great
Britain. Marketing operations in Euroi)e were realigned for improved sales cov-
erage in various Common Market countries. A major decision was reached to
discontinue manufacture and sale of coin-operated phonographs in the U.S., a
move which is expected to enhance future earnings.
Consolidated net sales on a world-wide basis for the year were $90,609,712, an
increase of 7% over the previoiis year's sales of $83,842,546 and the highest ever
achieved. The U.S. sales accounted for 81% of the total and foreign sales
for 19%. Important growth occurred in all products except coin-operated
phonographs.
Electronic organ sales continued its vigorous growth pattern of recent years
showing an increase in dollar sales volume of about 24% over last year largely in
our medium and higher priced organ products manufactured at Corinth, Missis-
sippi. Two new electronic organ product line programs were undertaken by the
Company during the year with manufacturing responsibility placed at the North
Tonawanda Division. One is the Sprite organ line, a moderately priced sei-ies of
organs with wide popiilar appeal. This product line, introduced at the June 1973
convention of National Association of Music Merchants, was an immediate success
and produced a very substantial backlog of orders. At North Tonawanda intensive
effort has been devoted to getting production underway on Sprite products to sat-
isfy dealer demand. A second product line was also initiated during the year
cou'^isting of a series of low priced organs including battery-operated ta))]e
models. Distribution has been primarily through non-Wurlitzer dealer channels.
Acceptance of this line has been good and the future growth possibilities look
attractive.
The Wurlitzer electronic piano is becoming a very popular product, and the
increase in dollar sales over last year was 13%. Wurlitzer conventional pianos
also showed an increase in dollar sales volume over last year. Sales of the widely
accepted Wurlitzer cigarette and vending machine line in Europe continued to
grow in the amount of 15% over last year.
Although our keyboard products business is profitalile. vigorous, and growing
rapidly, the overall operations of the Company resulted in a loss. Fortunately,
many of the problems producing this result are now behind us and imnroved
earuings for the future are clenrly in prospect. The major trouble area affecting
the earnings picture during the past year was our coin-operated phonograph
business which has been unsatisfactory from the profit viewpoint for the last few
years. At a Board of Directors' meeting on March 5, 1974 it was decided to dis-
continue phonograph manufacturing nnd selling operations in the United States.
It was also decided to continue to manufacture nnd «fMl phonoffrauhs and related
products outside of the United States through our German subsidiarv. Deutsche
Wurlitzer. as well as other subsidiaries ena-jiged in sales on a worldwide basis.
The decision to discontinue U.S. phonogranh operations was a difficult one to
make, but it is expected to enhance our financial position in the future in a
numl'er of lieneficial ways.
The consolidated net loss for the year ended INTnrch 31, 1974 was $7,702,682 or
$6.23 per share after a pre-tax provision of $11, ,360,000 for losses on disposal of
our U.S. coin-operated phonograph business. This provision was a direct result
of the decision to discontinue the coin-operated phonograph business and is
believed to be adenuate to cover the expected losses and costs associated with
liquidation of the U.S. phonograph operations. We exnect overall company op-
erations for the year ending March 31, 1975 to be profitable.
Cmisolidated net earnings in the previous year ending INIarch 31. 1973 were $2.-
191.171, or $1.77 per share before an extraordinary charge of $313,747 and $1,877,-
424, or $1.52 per share after the extraordinary charge.
418
The achievement of record dollar sales this year is evidence of the wide accept-
ance of Wui'Iitzer products all over the world. We believe world-wide interec?t iu
music is being stimulated partly by the new types of sounds and musical features
available to the public. Products such as the Wurlitzer Orbit series of electronic
organs with synthesizers and the Wurlitzer electronic piano have been a part of
the growth of interest in new sounds, and it is expected that the trend will
accelerate.
EXHIBIT B
The Wublitzer Co.,
Chicago, III., March 5, 1974.
[News Release]
R. C. Rolling, Chairman of the Board of The Wurlitzer Company, reported
that the Company's directors decided at their meeting today that the coin-
operated phonograph segment of the Company's business in the United States
should be disposed of by sale or liquidation. The importance of this product iu
United States operations has diminished, and it is no longer profitable. Sales vol-
ume in the current fiscal year is estimated at approximately fifteen per cent of
the Company's over-all volume. The decision does not affect the Company's
European operations, where Deutsche Wurlitzer coin-operated phonographs,
cigarette and other vending equipment and accessories will continue to be pro-
duced for sale throughout the world.
Mr. Rolfing said that as a result of this decision it is expected that the Com-
pany's operations for the current fiscal year ending March 31, 1974 will result
in a loss, inclusive of losses from liquidation of approximately $7,000,000 after
tax benefits.
Mr. Rolfing added that the action taken would materially strengthen the
Company and improve its operations, and that he is optimistic as to future earn-
ings in its continuing manufacture, distribution, and sale of electronic organs,
pianos, electronic pianos and related equipment at wholesale and in its 47 retail
stores.
Ago Koerv, Treasurer.
Mr. Kastenmeier. Thank you, Mr. Patterson.
Just for clarification, Mr. Patterson, you said the law review article
suggests it would not be in the economic best interest of the industry to
provide performing rights for artists. To what industry were they
referring when using the term "industry"?
Mr. Patterson. Well, they are talking primarily about the record
industry and the tape industry, and they do not touch on the consti-
tutional implications of the creation of what I would characterize as an
anomalous copyright, because I can conceive that, if Al Hirt could
collect a performing artist royalty, by the same token Jack Nicklaus
could copyright his swing, and the same with Mark Spitz, or Chris
Evert, and I do not think that a literal reading or even an updating
of the copyright clause to our present times would cover that as a
proper vehicle for utilization of the copyright clause.
Mr. Kastknmeter. Mr. Mawdsley, do you wish to make your state-
ment?
[The prepared statement of Mr. Mawdsley follows:]
Statement of Russell Mawdsley, Immediate Past President and Chairman
OF the Legislative Committee of Music Operators of America, Inc.
Mr. Chairman, I am Russell Mawdsley of Holyoke, Massachusetts. I appear
here in behalf of Music Operators of America, Inc., the national organization of
jukebox operators which has members in every State of the Union. I am the im-
mediate past president of the organization and presently serve as chairman of
its national legislative committee.
I have been a member of MOA for 20 years, and I have served on its board of
directors and as an oflScer in each of its several offices over the past 13 years.
419
I am also vice-president of the Massachusetts Coin Machine Association, the
state-wide organization of jukebox operators, and vice-president of the Western
Massachusetts Music Guild, a local association of jukebox operators in the west'
ern part of the State.
In my city of Holyoke, I am presently a director of one of our leading eommer--
cial banks, and I am a member of the Holyoke Planning Board, having served as-
its chairman for two years.
I have been a member of the board of directors of the Holyoke Chamber of Com-
merce. I am a past president of the Holyoke Kiwanis, and a foi-mer trustee of a
local savings bank.
I am president of Russell-Hall, Inc. a firm which operates jukeboxes, amuse-
ment machines, and a full line of vending machines, in the greater western
Massachusetts area, an area which is centered around the City of Springfield^^
Massachusetts. My firm operates about 100 jukeboxes, 150 amusement machines,-
and 700 vending machines, in about 450 localities in this area.
THE JUKEBOX INDUSTRY
I would now like to give you a comprehensive view of the jukebox industry,
nationwide. According to industry estimates, which we believe to be substantially
correct, there are about 7500 jukebox operators, and about 450,000 jukeboxes on
locations throughout the United States. We also estimate that jukebox operators
purchase about 75,000,000 records each year for play in their machines. Prior
to 1974, there were four manufacturers of jukeboxes in the United States, includ-
ing Rock-Ola, Rowe-AMI, Seeburg, and Wurlitzer. In the spring of 1974, however,
Wurlitzer discontinued its manufacture of jukeboxes, due to a significant decline
in jukebox business.
ECONOMIC CONDITION OF THE JUKEBOX INDUSTRY
We would also like to give your Committee as clear an understanding as possi-
ble regarding the current economic condition of the jukbox industry.
Like most other industries, the costs of our equipment and materials have been
rising drastically. New jukeboxes cost up to $2500 each, as compared with a
maximum of about $2000 ten years ago when this Committee held hearings on
this subject (Hearings on H.R. 4347, 89th Congress, Part I, page 561). Our singles
records now cost on the average 750 per record, which is a marked increase
from the 60^ which a typical operator reported to this Committee at its hearings
in 1965 (Hearings, Part I, page 570). Wages of our electronic and mechanical
technicians and our other costs of operations have risen even more drastically,
and are continuing to rise.
On the other hand, jukebox operators are unable to increase prices per play
so as to keep abreast of their increasing costs of operations. In some businesses
prices can be increased merely by changing the price tag, and the change may not
be noticed. In our industry, it is a matter of reducing the number of songs a
customer can play for a quarter, and also of changing the coin receiving mechan-
ism on every one of the operators' machines. Also, the location owner must be
consulted and his consent obtained, for he may object that a raise in the cost
to play music will be detrimental to his business. Prices of two plays per quarter
have been established by operators in some areas, but this is by no means gener-
ally accepted. In many areas, rates are still at 10(^ per play or three plays for
a quarter, and there are even some areas where the rate remains at 50 per play.
These conflicting and continuing pressures have necessarily and inevitably
resulted in a general reduction in the level of operatoi-s' income from operation
of jukeboxes. While we do not have statistics on operators' revenue throualiout
the United States, I think we can state with reasonable certainty that revenues
are declining. As a general average, gross receipts do not exceed $25 per juke-
box per week. I know that in my own area gross receipts average only $24 to
$25 per machine per week. And I would like to stress that these figures are ffross
receipts before they are divided between the operator and the location owner,
which is done usually on a 50-50 basis. Thus, the operators' gross revenues aver-
age something on the order of $12.50 per week. It is out of this small figure, of
course, that we must pay for our equipment and all of our costs of operations.
This economic picture explains why almost all operators have diversified their
activities by adding amusement and vending machines to their jukebox op-
erations. In fact, I am quite certain from my own experience that most opera-
tors cannot afford to operate jukeboxes unless they also operate amusement
420
and vending machines. It may be asked, then, why do operators continue to
operate jukeboxes. The answer is that location owners usually require jukeboxes
to be installed as a condition to haiing amusement and vending machines placed
in their locations. And they insist on having jukeboxes in their locations so as to
attract customers to their amusement and vending machines. This situation re-
flects the fact that jukeboxes provide the principal musical entertainment which
most working people can now afford. Jukeboxes are, indeed, as someone has
said, "the poor man's orchestra."
EFFECT OF H.R. 2223 ON THE JUKEBOX INDUSTRY
H.R. 2223 will have a serious impact on the jukebox industry. It must be noted
that the jukebox industry has never before been subjected to copyright per-
formance royalties. Thus, any new royalty will impact severely upon the in-
dustry, and will necessitate economic readjustments throughout the industry.
The .$8 royalty under Section 116 will add a completely new burden in the total
sum of at least $4,000,000 per year. Over and above this, there will be at least
$4,500,000 in mechanical royalties on the 75.000.000 records (at 6^ per record
under Section 115) which jukebox operators buy each yeai*. This amounts to an
increase of at least $1,500,000 per year in mechanical royalties over the exist-
ing rate of 24 per recording (4«? per record). AVe understand that a study made
for the Record Industry of America (ItlAA) indicates that the increase which
would result from the propo.sed new 34 mechanical royalty would amount to at
least $5 per jukebox per year, or to some $2,2.50.000 more than the existing me-
chanical royalty. Thus, it is evident that the royalty burden imposed upon juke-
box operators by H.R. 2223 will amount to at least $8,500,000 per year. We hope
the Committee will agree with us that this is more than a fair return to copy-
right owners fi-om this industry of small businessmen who serve as promoters of
records, as well as being the largest single industry consumer of records.
THE JUKEBOX INDUSTRY POSITION ON H.R. 2223
"We would like to summarize the position of ^lusic Operators of America, Inc.,
on the jukebox royalty provisions of H.R. 2223 as follows :
1. We support the proposed new $8 jukebox royalty as provided in Section 116.
2. We oppose any increase in that proposed royalty.
3. We also oppose any provision for readjustment of that royalty through a
Copyright Royalty Tribunal, or otherwise.
4. And finally, we oppose any fee for registration of jukeboxes.
Our reason for supporting the $8 royalty is the fact, as your Committee is well
aware, that our representatives made an agreement with the other intei'ested
parties to accept this royalty at the time the General Revision Bill (H.R. 2512,
90th Congress) was under consideration by the House of Representatives. It was,
and is. our understanding that this compromise was intended to be a complete
resolution of royalty claims against our industry. We have stood by this com-
promise in the expectation that all other interested parties would likewise do so.
We oppose any increase in the proposed $S royalty for wliatever reason, wheth-
er because of adjusments in the Consumer Price Index, or otherwise. As we
have shown above the jukebox industry simply cannot withstand any further
increase in copyright royalty burdens.
Our opposition to any provision for a readjustment of the proposed statutory
royalty rates rests upon the same grounds, that is, that the jukebox royalty is
an agreed compromise which does not include any provisiom for such rendjust-
ment. and further that the jukebox industry cannot withstand any royalty in-
creases, and should not be exposed to the uncertainties of such open-ended lia-
bilities.
We continue to oppose any fee for the registration of jukeboxes, again, for the
reason that such a fee would be inconsistent with the agreed compromise, and
for the further reason that the admini'^trative costs of registering jukeboxes
should be borne by the beneficiaries of the new royalty, rather than by the juke-
box operators who bear the burden of the royalty. In this connection, we would
like to ask your Committee to delete from Section 116(b)(1)(A) the phrase
whirh appears at lines 4 and 5 of page 24 of the Bill, and rends as follows : "and
in addition to the fee prescribed by Clause (9) of Sef^tion 708(aV'. That phrase
was left in the companion Senate bill (S. 1361, 93d Congress) through oversight'
when the registration fee that v.-as then provided bv Section 708(a) (9) was
deleted from that Bill. We understand there is no objection by the Copyright
'421
Ofl5ce to this request and tliat the staff of your Committee already have been ad-
vised of this needed correction.
THE MECHANICAL FEE
Section llo would increase the existing mechanical fee from 2^ to 3«^ per
recording. This new royalty would have its most burdensome effect upon the juke-
box industry, as this industry is the largest user of phonograph records. Thus,
the .iukeliox industry faces a doubling up of new royalties under both Sections 115
and 116. This goes far beyond the proposal offered by our representatives in the.
1965 hearings when they I'ecommentled an add-on to the mechanical fee to be pafdi
by jukebox operators (Hearings, I'art I, page 583). In 1966 and 1967, this Com-
mittee recommended an increase in the mechanical fee from 2^ to 2i'(;i^ (H. Rept-
No. S3, 90th Congress, page 74), and that was the amount of the proposed me-
chanical fee when the $8 jukebox royalty was agreed to and adopted. We urge-
the Committee to require music publishers and composers to come forward vnMn
proof that any increase in the existing royalty is needed to compensate them
fairly for the music they produce. In the absence of such persuasive proof we
urge the Committee to retain the present rate of 2^ per recording.
EECORDING ARTS PERFORMANCE ROYALTY
Although H.K. 2223 does not include any provision for a recording arts per-
formance royalty, we note such a proposal has been made in H.R. 5345, a bill
which we understand is also before this Committee. We are opposed to this pro-
posed new royalty for the reason that it would upset the compromise agreement
by which the proposed $8 jukebox royalty was first established. We also oppose
any such new royalty as a matter of principle because we believe that there should
be but one royalty for any one performance, and that if Congress creates any new
kinds of musical copyrights they should be shared in a single royalty among all of
those who claim to have contributed to the finished product.
CONCLUSION
In closing, I would like to state to the Committee that within the jukebox in-
dustry there have been, and still are, many who vigorously oppose conceding any
performance royalty to copyright owners. This is because they believe jukebox
operators perform a compensating service to the benefit of copyright owners. Any
new proposal to increase the royalty rate, or to subject it to further revision,
would substantially intensify that opposition and would make it increasingly
difficult for the industry's leaders to preserve support for the provisions of the
Bill as they have been agreed to.
We earnestly urge your Committee, therefore, to approve the provisions of
H.R. 2223 relating to the jukebox industry in their present form, with the excep-
tion of the minor change in Section 116(b) (1) (A) discussed above, and excepting
also any increase in the mechanical royalty under Section 115.
Thank you for giving us this opportunity to present the views of Music Opera-
tors of America, Inc.
TESTIMONY OF RUSSELL MAWDSLEY, CHAIRMAN, LEGISLATIVE
COMMITTEE, MUSIC OPERATORS OF AMERICA, ACCOMPANIED BY
NICHOLAS E. ALLEN, COUNSEL
Mr. Mawdsley. Yes.
Mr. Chairman, I am Russell Mav^dsley of Holyoke, Mass. I appear
here in behalf of Music Operators of America, Inc., the national orga-
nization of jukebox operators Avhicli has members in every State of
the Union. I am the immediate past president of the organization and
presently serve as chairman of its national legislative committee.
I have been a member of MOA for 20 years, and I have served on
its board of directors and as an officer in each of its several offices over
the past 13 years.
422
I am also vice president of the Massachusetts Coin Machine Asso-
ciation, the statewide orcjanization of jukebox operators, and vice
president of the Western Massachusetts Music Guild, a local associa-
tion of jukebox operators in the western part of the State.
In my city of Holyoke, I am presently a director of one of our lead-
ing commercial banks, and I am a member of the Holyoke Planning
Board, having served as its chairman for 2 years. I have been a member
of the board of directors of the Holyoke Chamber of Commerce. I am
a past president of the Holyoke Kiwanis, and a former trustee of a
local savings bank.
I am president of Russell-Hall, Inc., a firm which operates juke-
boxes, amusement machines, and a full line of vending machines in the
greater western IMassachusetts area, an area which is centered around
the city of Springfield, Mass. My firm operates about 100 jukeboxes,
150 amusement machines, and 700 vending machines, in about 450
locations in this area.
I would now like to give you a comprehensive view of the jukebox
industry, nationwide. According to industry estimates, which we be-
lieve to be substantially correct, there are about 7,500 jukebox oper-
ators, and about 450,000 jukeboxes on locations throughout the United
States. We also estimate that jukebox operators purchase about 75
million records each year for play in their machines. Prior to 1974,
there were four manufacturers of jukeboxes in the United States,
including Rock-Ola, Rowe-AMI, Seeburg, and Wurlitzer. In the
spring of 1974, however, Wurlitzer discontinued its manufacture of
jukeboxes due to a significant decline in jukebox business.
We would also like to give your committee as clear an understanding
as possible regarding the current economic condition of the jukebox
industry.
Like most other industries, the costs of our equipment and materials
have been rising drastically. New jukeboxes cost up to $2,500 each, as
compared with a maximum of about $2,000, 10 years ago, when this
committee held hearings on this subject — hearings on H.R. 4347, 89th
Congress, part I, page 561.
Our singles records now cost on the average 75 cents per record,
which is a marked increase from the 60 cents which a typical operator
reported to this committee at its hearings in 1965 — hearings, part I,
page 570.
Wages of our electronic and mechanical technicians and our other
costs of operations have risen even more drastically, and are continuing
to rise.
On the other hand, jukebox operators are unable to increase prices
per play so as to keep abreast of their increasing costs of operations. In
some businesses, prices can be increased merely by changing the price
tag, and the change may not be noticed. In our industry, it is a matter
of leducing the number of songs a customer can play for a quarter,
and also of changing the coin receiving mechanism on every one of
the operators' machines. Also, the location owner must be consulted
and his consent obtained, for he may object that a raise in the cost to
play music will be detrimental to his business. Prices of two plays per
quarter have been established by operators in some areas, but this is
by no means generally accepted. In many areas, rates are still at 10
cents per play or three plays for a quarter, and there are even some
areas where the rate remains at 5 cents per play.
423
These conflicting and continuing pressures have necessarily and
inevitably resulted in a general reduction in the level of operators'
income from operation of jukeboxes. While we do not have statistics
on operators' revenue throughout the United States I think we can
state with reasonable certainty that revenues are declining. As a gen-
eral average, gross receipts do not exceed $25 per jukebox per week.
I know that in my own area gross receipts average only $24 to $25
per machine per week. And, I would like to stress that these figures
are gross receipts before they are divided between the operator and the
location owner, which is done usually on a 50-50 basis. Thus, the
operators' gross revenues average something on the order of $12.50
per week. It is out of this small figure, of course, that we must pay for
our equipment and all of our costs of operations.
This economic picture explains why almost all operators have diver-
sified their activities by adding amusement and vending machines to
their jukebox operations. In fact, I am quite certain from my own
experience that most operators cannot afford to operate jukeboxes
unless they also operate amusement and vending machines. It may be
asked, then, why do operators continue to operate jukeboxes? The
answer is that location owners usually require jukeboxes to be installed
as a condition to having amusement and vending machines placed in
their locations. And they insist on having jukeboxes in their locations
so as to attract customers to their amusement and vending machines.
This situation reflects the fact that jukeboxes provide the principal
musical entertainment which most working people can now afford.
Jukeboxes are, indeed, as someone has said, the poor man's orchestra.
H.R. 2223 will have a serious impact on the jukebox industry. It
must be noted that the jukebox industry has never before been sub-
jected to copyright performance royalties. Thus, any new royalty will
impact severely upon the industry, and will necessitate economic re-
adjustments throughout the industry. The $8 royalty under section
116 will add a completely new burden in the total sum of at least $3.6
million per year. Over and above this, there will be at least $4.5 million
in mechanical royalites on the 75 million records — at 6 cents per rec-
ord under section 115 — which jukebox operators buy each year. This
amounts to an increase of at least $1.5 million per year in mechanical
royalties over the existing rate of 2 cents per recording — 4 cents per
record. We understand that a study made for the Record Industry
of America, RIAA, indicates that the increase which would result
from the proposed new 3 cents mechanical royalty would amount to
at least $5 per jukebox per year, or to some $2,250,000 more than the ex-
isting mechanical royalty. Thus, it is evident that the royalty burden
imposed upon jukebox operators by H.R. 2223 will amount to at least
$8 million per year.
We hope the committee will agree with us that this is more than a
fair return to copyright owners from this industry of small business-
men who serve as promoters of records, as well as being the largest
single industry consumer of records.
We would like to summarize the position of Music Operators of
America, Inc., on the jukebox royalty provisions of H.R. 2223 as
follows :
One : We support the proposed new $8 jukebox royalty as provided
in section 116.
Two : We oppose any increase in that proposed royalty.
424
Three: We also oppose any provision for readjustment of that roy-
alty through a copyright royalty tribunal, or otherwise.
Four : And finally, we oppose any fee for registration of jukeboxes.
Our reason for supporting the $8 royalty is the fact, as your com-
mittee is well aware, that our representatives made an agreement with
the other interested parties to accept this royalty at the time the
general revision bill, H.R. 2512, 90th Congress, was under considera-
tion by the House of Eepresentatives. It was, and is, our understanding
that this compromise was intended to be a complete resolution of
royalty claims against our industry. We have stood by this compromise
in the expectation that all other interested parties would likewise do.
so.
Vie oppose any increase in the proposed $8 royalty for whatever
reason, whether because of adjustments in the Consumer Price Index,
or otherwise. As we have shown above, the jukebox industry simply
cannot withstand any further increase in copyright royalty burdens.
Our opposition to any provision for a readjustment of the proposed
statutory royalty rates rests upon the same grounds, that is, that the
jukebox royalty is an agreed compromise which does not include
any provision for such readjustment, and further that the juke-
box industry cannot withstand any royalty increases, and should not
be exposed to the uncertainties of such open-ended liabilities.
We continue to oppose any fee for the registration of jukeboxes,
again, for the reason that such a fee would be inconsistent with the
agreed compromise, and for the further reason that the administra-
tive costs of registering jukeboxes should be borne by the beneficiaries
of tlie new royalty, rather than by the jukebox operators who bear the
burden of the royalty. In this connection, we would like to ask your
committee to delete from section 116(5) (1) (A) the phrase which ap-
pears at lines 4 and 5 of page 24 of the bill, and reads as follows : "and
in addition to the fee prescribed by clause (9) of section 708(«)."
That phrase was left in the companion Senate bill — S. 1361, 93d
Congress — through ovei'sight when the registration fee that w^as then
provided by section 708 («) (9) was deleted from that bill. We under-
stand there is no objection by the Copyright Office to this request and
that the staff of your committee already have been advised of this
needed correction.
Section 115 would increase the existing mechanical fee from 2 to
3 cents per recording. This new royalty w^ould have its most burden-
some effect upon tlie jukebox industry, as this industry is the largest
user of phonograph records. Thus, the jukebox industry faces a doubl-
ing up of new royalties under both sections 115 and 116. This goes far-
beyond the proposal offered by our representatives in the 1965 hear-
ings when they recommended an add-on to the mechanical fee to be
paid by jukebox operatois — hearings, part I, page 583.
In 1966 and 1967, this committee recommended an increase in the
mechanical fee from 2 cents to 2i^ cents — Plouse Report No. 83, 90th
CongroHS, page 74 — and that w^as the amount of the proposed me-
chanical fee when the $8 jukebox royalty was agreed to and adopted.
We urged the committee to require music publishers and composers to
come forward with proof that any increase in the existing royalty is
needed to compensate them fairly for the music they produce. In the
absence of such persuasive proof, we urge the committee to retain
the present rate of 2 cents per recording.
425
Although lI.E. 2223 does not inchide any provision for a record-
ings arts performance royalty, we note such a proposal has been made-
in H.R. 5345, a bill which we understand is also before this committee.
We are opposed to this proposed new royalty for tlie reason that it
would upset the compromise agreement by which the proposed $8-
jukebox royalty was first established. We also oppose any such new
royalty as a matter of principle because we believe that there should
be but one royalty for any one performance, and that if Congress cre-
ates any new kinds of musical copyrights, they should be shared in a
sinp-le rovaltv among all of those who claim to have contributed to
the finished product.
In closing, I would like to state to the committee that within the
jukebox industry there have been, and still are, many who vigorously
oppose conceding any performance royalty to copyright owners. This
is because they believe jukebox operators perform a compensating
service to the benefit of copyright owners. Any new proposal to in-
crease the royalty rate, or to subject it to further revision, would sub-
stantially intensify that opposition and would make it increasingly
difficult for the industry's leaders to preserve support for the provi-
sions of the bill as they have been agreed to.
We earnestly urge your committee, therefore, to approve the pro-
visions of H.R. 2223 relating to the jukebox industry in their present
form, with the exception of the minor change in section 116(5) (1) (A)
discussed above, and excepting also any increase in the mechanical
royalty under section 115.
Thank you for giving us this opportunity to present the views of
Music Operators of America, Inc.
Thank you, Mr. Chairman.
Mr. Kastenmeier. Thank you, IMr. Mawdsley.
Mr. Mawdsley, for my benefit, I would ask you, or Mr. Allen, on
page 8 you refer to "and in addition to the fee prescribed by clause
(9) of section 708(a)," which certainly is in the bill, you have as-
sumed that to be 50 cents.
How did you arrive at the fact that that would be 50 cents, you
know, just for my benefit ?
Mr. Ai.LEisr. Well, are you speaking now — are you speaking of the-
registration fee ?
Mr. Kastexmeier. Yes ; correct.
Mr. Allen. Well, it was 50 cents when added to the bill by the Sen-
ate subcommittee back in 19G9, I believe. It was at that time that the
committee re^'ersed their original Senate bill provision with respect
to the royalty and adopted the $8 as passed by the House, which added
three other things. One of them was the 50-cent registration fee.
Mr, Kastenmeier. It does not appear in the bill.
Mr. Allen. That is right.
Mr. Kastenmeeer. Designated as 50 cents, but a sum — it would be
that?
Mr. Allen. We are assuming it would not. We are hoping it would
not be put back in there.
Mr. Chairman, we are only talking about 50 cents because that is
what it w^as. It never was anything else, and when the 50-cent regis-
tration fee was deleted bj^ the Senate Judiciary Committee, that tie-in
phrase that Mr. Mawdsley referred to was not also deleted. It really
was just an oversight, and I understand both on the Senate side and on
57-786— 76— pt. 1 28
426
this side, that it is considered to be a drafting error that would be
corrected.
Mr. Kastexmeier. I understand.
One other question I have. Supposing a bill more or less like this is
passed, and a number of years go by, and you are able to live with and
absorb the $8 fee, but it becomes evident that there has been an erosion,
that there has been a cost-of-living increase, and that given the
standards of, let us say, 1975, 1976, or 1977, with inflation and whatnot,
suggests that a comparable fee at that time, some years hence, let us
say the year 1980, would be $10 or $12. Would you oppose the matter
being reopened for a determination of what an equitable fee would be
by Congress or otherwise for the purpose of an adjustment, or do you
consider the $8 nonadjustable, in concrete forever ?
Mr. Allen. Well, Mr. Chairman, this is the way I think I should
put this : The jukebox industry, the jukebox operators look to you,
Mr. Chairman, and they look to the Congress to do the thing that
is right in the public interest. Certainly no future Congress is going
to be bound by what this Congress does, and no future committee is
going to be bound by what your committee does. But, the jukebox peo-
ple look to Congress for their protection, and we have made this point,
or endeavored to make this point, whenever this question has come up
in the past. We have made it when your committee was holding hear-
ings 10 years ago. We cannot bargain on equal terms with the big per-
forming rights societies, and we know it. We know from the history
of the societies themselves that BMI was spawned because ASCAP
could not be dealt with. We do not expect that we can bargain on equal
terms with the people who control the music we play, but we can look
to Congress.
Absent a ceiling in the statute, and this is the thing that has been
so important to us all the way through, and so important to us
when we agreed to the $8, the thing that we need most is the protec-
tion that is afforded by a statutory ceiling.
Now going back, if the Congress in its wisdom, and your committee
in its wisdom, in the future should decide that a higher rate is in
order, certainly our industry will abide by it and will gladly do so. But,
we do not feel that we can bargain on equal terms, nor do we feel we
can before a copyright tribunal litigate, let us say, on equal terms
witli an adversary who can pour in millions of dollars in an effort to
raise the fee.
Ours would be a pittance. We could not do the job adequately of
meeting the kind of opposition we anticipate.
Mr. Kastenmeier. Well, I appreciate your statement, and that, as
I recall, is a consistent statement, although I do wonder, with all
deference, whether the Music Operators of America with 7,500 mem-
bers plus the manufacturers, even though it may be an economically
distressed industry at the moment, are not on equal terms with the three
l^erforming rights societies, given, as I think one of you has suggested,
the slight difference from Mr. Korman's figures, that their gross
receipts are somewhat under — I think you suggested $100 million,
and they suggest somewhat over, that you are not on really equal
economic footing with them.
Now, I should understand why it is that you would not want to have
to bargain if, in fact, you were protected statutorily, so that such
bargaining was unnecessary, obviously. But, the question as to whether
427
you are equals in a tribunal, sliould one be created, is a question about
whose answer I am not very sanguine.
Mr. Allen. It is a matter of economics, Mr. Chairman, and just the
sheer power of financial strength. Billboard magazine last month re-
ported that the societies' yearly take is $97 million, almost $100
million. That is a different world from the jukebox people, whose
incomes are in just thousands. They cannot possibly organize studies,
economic studies or reports, analyses that come anywhere near what
their opponents would be able to do ; and that is why we do not feel that
we can look down that road for the protection that we believe would
be much more meaningful to us through the Congress.
Mr. Kastenmeier. Yes.
I appreciate your statement, although in terms of economics, Mr.
Mawdsley says that a box grosses perhaps $25 a week, and then it has
to be split and so forth.
Looking merely at the gross alone, 50 times $25, $750 a year, times
around half a million boxes, suggests somewhere approaching grosses
handled by machines in the order of $375 million. That is not the net
income, of course. That compares with perhaps $100 million handled
by the performance rights societies in a year. So in comparing eco-
nomic strength, one group against the other, you know, I am not
altogether persuaded that you are at that sort of disadvantage, not-
withstanding the fact that I sliould understand why you would not
v.ant to have to negotiate at all.
Mr. Allen. I would like to respond to some of the figures, Mr.
Chairman.
You were using a $25 figure, and our point is that our people receive
only a half of that.
Mr. Kastenmeier. Yes. That is the outer figure of total money that
the operator puts his hands on. He has to share that 50-50, and he
then has to buy the machines, he has got the overhead, so bis net is
first of all, you split the $375 million in two, and then figure a net on
the balance of $180 million plus. Obviously it is much smaller as a
figure for 7,500 operators.
Mr. Allen. Now, our organization, Mr. Chairman, is not 7,500.
It is about less than 1,000. So, we are small. We are small people com-
pared with the people on the otlier side of this problem.
Mr. Kastenmeier. Mr. Mawdsley said there were 7,500, but I gather
those that are actual members of your organization are more or less
1,000?
Mr. Collins. Eight.
Mr. Mawdsley. I maybe have not explained what I meant to imply.
We feel there are about 7,500 operators of jukeboxes in the country.
Mr. Kastenmeier. That might be affected by this bill, whether or not
they are members of your organization ?
Mr. jMa-\vdslet. That is right, and the members of our association are
about 1,000.
Mr. Patterson. Mr. Chairman, if I may refer the committee to hear-
ings before the Senate Subcommittee on Patents, Trademarks, and
Copyrights on S. 597 in 1967, there is a study in there prepared at our
re<iuest by Price, Waterhouse & Co. You may recall tJie details of that.
xVnd it appears on pages 268 through 273. But the Price, Waterhouse
study states :
428
For the operators who own less than 50 machines, and who constitute ^>4.2
percent of the total replies received, the average amount available for salary
and for Federal and State income taxes is less than the average for all operators
and is $4,9(36 a year or $414 a month. If the annual amount is reduced by $1,422,
representing a 6-percent return on a $23,000 investment, and $517 for the proposed
royalty, the owner-operator would have $3,027 a year, or $252 a month available-
for salary and Federal and State income taxes.
Now they sent out something like 22,000 questionnaires to the esti-
mated 7,000 jukebox operators, and I do not think that the economics of
the industry have changed significanth\ because I do know the price
of the machines has gone from $2,000 to $2,500, and the price per phiy
has remained fairly static, so that the average small operator's economic
position is no better than it was when the $8 per year fee was agreed as a
compromise.
Mr. Kastenmeier. Yes. The thrust of that particular report is tliat
the net an average operator makes is what ? Around just under $5,000 ?
Mr. Patterson. That is right.
Mr. Mawdsley. May I point out, Mr. Chairman, that the figures that
I used here on page 4, where I say I note the prior gross receipts average
only $24 or $25, these are our figures that I derived from my company.
Now these are highly disputed by some of the people that are on thi&
panel as they think that my average is a little bit higher tlian theirs and
that in certain sections of the country it is much lower than my average.
I truthfully had nothing to go on but my OAvn figures from my own
company, and we may be a little bit different than some of the other
companies in the way we operate, and so we average a little bit higher.
Mr. Ivastenmeier. I am surprised that it is that low if we are dealing
in quartere rather than dimes. You know, that is only 100 quarters per
machine in a week, and that is not very much.
Mr. Mawdsley. If I may respond to that, our average in our company
went up slightly when we did move from 10 cents to 25 cents a play,
but not drastically. I think it went up probably by $1.35 per week per
machine when we made the changeover from a 10-cent play to two for a
quarter play.
Mr. Kastenmeier. I am going to yield to the gentleman from New
York, Mr. Pattison.
Mr. Pattison. I have one question. There is a section 115 and section
116 and both provide for a change in the mechanical fees from your
testimony, is that correct ?
Mr. Allen. No; not quite, Mr. Congressman. It is 115. It changes the
mechanical.
Mr. Pattison. From what, 2 cents to P> cents ?
Mr. Allen. Yes.
Mr. Pattison. Mr. Mawdsley testified that there was a reference
from a change to a 2 cents to 6 cents.
Mr. Allen. Mr. Congressman, the 6 cents is the combination of the
two sides, that is the 3-cent royalty looking at the record as taking two
or containing two songs.
Mr. Pattison. So we are talking about the same thing, the 2 cents
to the 3 cents, and that is reflected, is it not, to the price of the record ?
Mr. Allen. Yes.
Mr. Pattison. You do not pay that each time you play it ?
Mr. Allen. Yes, Mr. Congressman. It is reflected in the price of the
record, and that is why the jukebox industry insists that it is carrying
429
the burden of the mechanical fee. The manufacturers certainly do pass
it on, and the record industry study referred to, was made, and you will
be receiving it next week, includes an exhibit which establishes the cost
of about $5 a box as a i-esult of the 1-cent increase.
Mr. Pattisox. So that you could expect, if you were paying 75 cents
for a record that you would pay 76 cents ?
Mr. Alle:n'. No, sir. It is in the 75 cents.
Mr. Pattison. It is 2 cents now? And if it goes from 2 cents to 3
cents, then you expect it would go to 76 cents ?
Mr. Allex. It probably would.
Mr. PATTisOiSr. But that would be the total effect on the increase in
the mechanical fee from 2 cents to 3 cents ?
Mr. Allen. Yes.
Mr. Pattison. I have no further question.
Mr. Kastenmeier. That amount varies in a sense. They assume now
they are paying $3 million a year in mechanical royalties buried in the
price of the record, and that would be raised to 4.5, 50 percent by virtue
of the mechanical royalty provided for in the bill.
Just one other question. As candidly as you can, could you tell me
what happened in the Senate Judiciary to convince them that they
ought to adopt a tribunal; that is to say, they are to make section
116 subject to tribunal readjustment after July 1, 1977? What per-
suaded them? Why were they persuaded? What equity did they see?
j\Ir. Allen. This was in executive session. The statements that Sen-
ator McClellan has made, or his counsel for him. are to the effect that
they want to see all of the statutory rates dealt with similarly. Now, we
answered in this way: CATV interests could never agree on a royalty,
they remain widely ai^art even I believe to this time. Now, that w^as 114.
The mechanical fee that we have been talking about, there was no in-
centive really from the proponents of that section to take it out of the
copyright tribunal, because those same interests were advocating the
new performance royalty and they could not argue against it.
Now, in our situation we are very much unlike CATV, and this is
what we stressed in our responses to Senator McClellan. We had an
agreement. We did not need a copyright royalty tribunal to resolve the
current issue of what the royalty rate should be. CATV did. And the
people behind the mechanical fee were neutral on it.
But the fact still remains we have an agreement, an agreement which
we intended and expected to serve as a ceiling, and, therefore, the ra-
tionale for bringing the other statutory rates into the control of a copy-
right tribunal does not apply in our situation. And I think that is the
reason behind the Senate action in taking it out.
I think I know a little about that one too, how that came about. It
was for that very reason that we had an agreement. There was
no need for any further review of a rate that had been agreed on, and
I would surely like to emphasize this aspect of our problem. And I
guess this is the nub of the hearing today, whether there should be re-
adjustment of this rate. We are going right now from zero performance
fee to a proposed $8. There is a huge jump there, and we have endeav-
ored to show it is all we can stand. So, it is not like revising a rate. It is
establishinof something new that this industry has never had to carry
before, and it is going to require a lot of adjustment, and undoubtedly
430
it will result in marginal locations, or a certain percentage anyway in
marginal locations, being taken out.
Mr. Kastenmeiee. My last question is, you have heard, I believe it
was Mr. Korman's suggestion, how if there were tribunal effective after
July 1, 1977, how it would work, how you would negotiate, and what
the history has been of ASCAP, talking about his own performing
rights society, in negotiations with others up or down, as a matter of
fact. How do you see it working? How would it work? Supposing the
Senate bill as it came out of committee were, in fact, then enacted
into law, despite your protestations. How would it work ? That is, how
do you see it working any differently than Mr. Korman suggested it
might work operationally in terms of your getting together and nego-
tiating ?
Mr. Allex. Well, Mr. Chairman, the bill as it came out of the Senate
does not have this in it.
Mr. Kastenmeier. No; I understand. This is a hypothesis only, that
somehow a bill as it came out of coimnittee were adopted and you found
yourselves, jouv industry, in a position of having a tribunal, a $8 fee,
the other thing that you agreed upon, but there would be a tribunal.
Then there would be notice in the Federal Register by the Register of
Copyrights and so forth. How do you see it working ? Presumably you
and others, perhaps you and Mr. Patterson, and various others here,,
the officers of the organization would be involved as well, and we would
be getting together with representatives of the performing rights
societies and negotiating some way. I was wondering how you see it
working if you were, you know, in that position, if that happened to
you?
Mr. Patterson. I would think, Mr. Chairman, that there would be-
the alternative of negotiating with the representatives of the societies
when they advise that they felt that the fee should be $12 per year or
alternatively, trying to develop in depth and in detail the economics of
the industry and whether there had been changes that merit that. And
as Mr. Korman said, under the consent decree, ASCAP has yet to have
the Federal court establish a decree although there have been a num])er
of proceedings. The parties have arrived at a negotiated rate. But I
think again, using the term you did, in candor, the reason the exception
has prevailed for 40 years or more is because the jukebox industry has
been a grassroots, rural industry in terms of image and in terms of
looking to Congress for protection, while the performing rights so-
cieties have essentially been urban or metropolitan in image. And going
to a copyright tribunal, the operators, in my judgment, feel that they
would be at a disadvantage from a standpoint of sheer weight of bar-
gaining strength, whereas if they were looking to their Congressman to
accept as reasonable or not an increase in the statutory rate, their posi-
tion would be more effective.
Mr. Kastenmeier. But you do not take any major difference from ther
way Mr. Korman suggested it would operate, what he suggested in
terms of hypothctically how it would operate ?
Mr. Patteirson. If it were there, for practical purposes I think that
is how it would operate.
Mr. KAsnsNMEiER. Well, thank you very much.
If Mr. Pattison has no more questions, I would like to thank all the
members of the panel for their contribution this morning. And in terms
431
of the case of Mr. Nicholas Allen and Mr. Perry Patterson, we want
to greet you back to a hearing before this committee after an absence of
many years. And I would express gratitude of the committee to the
rest of you who as officers of the organizations and who have otherwise
appeared before us this morning. Thank you.
Mr. Collins. Thank you, Mr. Chairman.
Mr. Kastenmeier. This concludes this morning's hearing on one as-
pect of copyright, section 116 on the impact on jukeboxes in America.
On next Thursday morning, June the 5th in this room at 10 o'clock,
the committee shall hear from Mr. Ashton Hardy, General Counsel
of the Federal Communications Commission ; Mr. Thomas Keller, the
Acting General Counsel of the Office of Telecommunications Policy ;
Mr. Fulton Brylawski, professor; Mr. Rondo Cameron and Mr.
Donald Merry of Sicom Electronics Corp. So until that time the
subcommittee stands adjourned.
Mr. Allen. I am sorry, I forgot to request permission. We are not
going to be present, I think, at the later hearings having to do with
mechanical fee and the roj^alty for the recording arts, and we would
like to have permission to file whatever reply we think might be
appropriate
Mr. Kastenmeier. Yes.
Mr. Allen [continuing]. To the statements that will be made.
Mr. Kastenmeier. Without objection, not only will the prepared
statements that you have made today be accepted for the record in
full, in addition to your oral statements, but any statement the Music
Operators of America or Mr. Patterson may have in connection with
the question of mechanical royalty will be accepted for the record.
Until Thursday next, 10 o'clock in this room, the subcommittee
stands adjourned.
[Whereupon, at 12 :35 p.m. the subcommittee recessed to reconvene
on Thursday, June 5, 1975, at 10 a.m.]
COPYRIGHT LAW REVISION
THURSDAY, JUNE 5, 1975
House of Representatives,
Subcommittee on Courts, Civir^ Liberties,
AND THE Administration of Justice
of the Committee on the Judiciary,
Washington^ D.C.
The subcommittee met, pursuant to call, at 10:15 a.m., in room
2226, Eayburn House Office Building, the Honorable Robert W.
Kastenmeier [chairman of the subcommittee] presiding.
Present: Representatives Kastenmeier, Danielson, Drinan, Patti-
son, and Railsback.
Also present: Herbert Fuchs, counsel, and Thomas E. Mooney,
associate counsel.
Mr. Kastenmeier. The committee will come to order.
The committee is meeting this morning for the purpose of con-
tinuing hearings on the copyright revision bill, H.R. 222.3, and other
bills relating to the subject. This morning we have a series of wit-
nesses, the first two representing the Federal Government.
I would first like to call Mr. Ashton Hardy, the General Counsel,
Federal Communications Commission. Mr. Hardy.
Mr. Hardy. Thank you, sir.
Mr. Kastenmeier. You are most welcome. We would appreciate
it if you would proceed.
TESTIMONY OF ASHTON R. HARDY, GENERAL COUNSEL,
FEDERAL COMMUNICATIONS COMMISSION
Mr. Hardy. Thank you, Mr. Chairman.
Mr. Chairman, I am pleased to have the opportunity to present
the views of the Federal Communications Commission with respect
to H.R. 2223, a bill for the general revision of the copyright law.
The committee is to be commended for addressing the very serious
need for comprehensive reform of our Federal copyright laws. As
you know, the statute governing this subject was enacted in 1909 and
was drafted in terms of the problems of that era. Motion pictures
and sound recordings as we now know them were not envisioned at
that time, nor were radio and television.
Mr. Chairman, I realize that the scope of this legislation is broad
and that your subcommittee is concerned with such diverse subjects
as library photocopying, bootlegging of film and sound recordings,
and the ownership of presidential documents. The Commission has
no jurisdiction over matters such as these and consequently I will
not comment on them. However, the Commission has asserted juris-
( 433 )
434
diction and promulgated comprehensive rules governing the cable
television industry, the subject of section 111 (c) and (d) of the
proposed legislation, and thus my testimony addresses some of the
background of the cable copyright problem.
Cable television is among those forms of communication which were
not foreseen or provided for in the 1909 act. For this reason a com-
plex controversy arose over the copyright liability of cable systems.
I would like to trace briefly the evolution of this controversy and
the Commission's involvement in it.
When the first cable systems began to operate, most merely ex-
tended local television service to rural areas where it had not been
previously available. They did not import distant signals into mar-
kets where television service already existed, nor did they originate
programing or serve major metropolitan areas. For these reasons,
broadcast licensees did not anticipate that the new industry would
pose the copyright problems that now exist. Similarly, copyright
proprietors were generally unconcerned about the growth of cable
because they continued to receive royalties from conventional broad-
casters and did not anticipate that CATV would affect this revenue.
Initially the FCC expressed reluctance to assert jurisdiction over
cable in the absence of specific legislative authorization. In 1959, 26
FCC 402, the Commission ruled that cable systems could retransmit
programs without the express authority of the originating station.
We reasoned that cable was merely a means of extending television
service and did not pose an economic threat to the broadcast industry.
Pursuant to this ruling, cable operators were free to distribute pro-
graming without paying copyright royalties.
However, the attitude of the various parties changed abruptly when
cable systems began to import distant signals, originate programing,
and provide service in metropolitan markets which posed clear com-
petitive threats to broadcasters. Copyright questions then came into
focus and broadcasters and copyright proprietors sought protection
from the FCC and the courts.
The Commission responded by abandoning its former laissez-faire
posture on cable and in 1962 denied a cable system permission to
import additional distant signals by microwave. I refer, of course,
to the Commission's ruling in the Carter Mountain Tra/n,srnission
Corp. case, which was first affirmed by the District of Columbia Cir-
cuit Court of Appeals and certiorari was denied by the Supreme
Court. [32 FCC 459, aff'd 321 F. 2d 359 (D.C. Cir.), cert, denied,
375 U.S! 951 (1963).] The Commission was influenced in its decision
by the fact that the proposed importation would pose an economic
threat to a television licensee which could deprive the public of his
service.
In 1965 the Commission further asserted its jurisdiction over cable
in its first report and order on cable television — 38 FCC 683— which
contained the so-called nondu plication rule. This rule manifested
the Commission's desire to protect the public interest in existing tel-
evision service, and to encourage the development of local broadcast
stations. It prevented duplication of the originating station's signal on
a cable system for a certain period before and after carriage by that
station. Under the rule, a copyright proprietor could limit the time and
area in which a program was shown and a broadcaster could present
435
programing previously shown on a network on a delayed basis with-
out running the risk of losing his exclusivity to a cablecaster.
The Commission's second report and order, 2 FCC 2d 725, adopted
in 1966, required that all new cable systems in the top 100 television
markets, which parenthetically serve 90 percent of all television
viewers, obtain FCC approval before importing new distant signals.
Approval was conditioned upon a finding that the new service would
be consistent with the establishment and healthy maintenance of
television broadcast service in the area. The effect of the rule made it
virtually impossible for cable systems to establish new service in
urban markets.
Subsequently, a San Diego cable operator challenged the Comrnis-
sion's authority to bar expansion of its system under the major-
market-distant signal rule. However, the Suprerne Court upheld the
Commission's action as reasonably ancillary to its duty to regulate
television broadcasting. I refer, of course, to the Southwestern Cable
case decided by the Supreme Court [392 U.S. 157, (1968) ] .
Because FdC regulation had not addressed many of the copyright
questions posed by the advent of cable, broadcasters and cable pro-
prietors sought relief in the courts. They argued for an expansive
interpretation of the Copyright Act which would include a cable
broadcast as a public performance and thus subject cable operators
to copyright liability.
The Supreme Court confronted this issue in the now famous Fort-
mglitly Corj). v. United Artists Television^ Inc. case, 392 U.S. 290 —
1968 — where United Artists sought to recover royalties from Fort-
nightly, a West Virginia cable system which imported into its market
signals which could not be received through ordinary over-the-air
means. Fortnightly argued that it provided merely a reception service,
did not "perform", and therefore escaped liability.
In finding for the cable system, the Court employed a functional
test under which it held that the cable system Avas a "viewer", not a
"performer." Since "viewing" fell short of infringement, no liability
was incurred. Implicit in the Court's opinion was the view that Con-
gress is better equipped than the judiciary to strike an appropriate
balance among the various competing interests.
The Commission then issued proposed general rules for cable op-
eration [15 FCC 2d 417 (1968)]. This proceeding served as a cata-
Ivst for serious discussions concerning the manner in which the in-
dustry should be regulated. As this lengthy proceeding neared its
close,'the Commission forwarded a letter of intent on xYugust 5, 1971,
to Congress which outlined its plans for the near-term regulation
of cable. In our letter, we acknowledged the argument raised by
several parties that we should defer promulgating rules governing
cable until new copyright legislation was enacted. In response we
expressed the view that^cable regulation and copyright could be sep-
arately considered. Accordingly, we urged the Congress to promptly
enact a copyright statute and stated our intent to proceed with rule-
making. Among the rules outlined in our letter was a solution to the
distant signal problem which would permit limited importation of
such signals based upon a formula geared to market size, and a pro-
vision allowing program exclusivity in the top 100 markets.
436
In our letter, we encouraged industry principals to agree upon a
schedule of ro^'alty fees in negotiations then in progress. The result of
these negotiations "was the so-called "consensus agreement" which sug-
gested certain revisions to the proposal advanced in our letter of
intent and pledged the parties to support separate cable copyright
legislation. The legislation was to establish a system of copyright
liability for cable carriage of broadcast signals with compulsory li-
censing of sigiials authorized by the Commission. A schedule of royalty
fees or other payment mechanism was to be agreed upon by copyright
proprietors and cable operators. In the absence of agreement, the
I)arties agreed to submit to compulsory arbitration.
The Commission found the j^rovisions of the consensus agreement to
be reasonable. Consequently, those aspects of the agreement subject
to our jurisdiction were imjDlemented in our first comprehensive cable
rules issued in 1972. [36 FCC 2d 143.] We took this action believing
that it would open the door to cable development and that copyright
legislation would be enacted shortly thereafter. Unfortunately, the
negotiations concerning fee schedules proved inconclusive, and com-
pulsory arbitration has not been forthcoming. Thus, legislative efforts
in this area have been stymied.
The importance of a prompt resolution of the copyright problem
was heightened by a second ruling of the Supreme Court on the cable
copyright issue. In CBS v. Telejirom'pteT, 415 U.S. 394 (1974), a Tele-
prompter cable system imported signals from as far as 600 miles from
its service area, as opposed to Fortnightly-s 82 miles. It had also en-
gaged in advertising not confined to program origination channels
and had interconnected with other systems for specialized programing.
Despite the disparity of distance and the presence of services char-
acteristic of broadcasting, the couii held that Teleprompter retained
its "viewer" status and had not "performed" under the Fortnightly
rationale. Thus, it was not liable under the Copyright Act.
Seemingly announcing the end of its resilience to coiistrue the
act to accommodate changing conditions, the Court called upon Con-
gress to enact remedial legislation. Speaking through Mr. Justice Stew-
art, it said :
These shifts in current business and commercial relationships * * * simply
cannot be controlled by means of litigation based on copyright legislation
enacted more than half a century ago, when neither broadcast television nor
CATV was yet conceived. Detailed regulation of these relationships, and any
ultimate resolution of the many sensitive and important problems in this
field must be left to Congress. (415 U.S. at 414.)
In view of the preceding analysis, it is clear that if a solution to
the cable copyright dilemma is to be reached, it will only be through
congressional action. I will not rehash the details of the various
attempts made in Congress to enact legislation, for I am confident
that they are better known to your subcommittee, !Mr. Chairman, than
they are to the Commission. Suffice it to say that legislation has been
considered by at least one house of Congress every year for the
last 10. Furthermore, I do not wish to offer detailed comments with
respect to the specifics of section 111 (c) and (d) of the legislation
now before you. Enactment of substantive copyright law is an area
in which the Commission has no jurisdiction and in which we defer
to congressional judgment and expertise.
437
However, the Commission has expressed some general views on the
subject which perhaps bear rei)eatino; in this forum. First of all, we
wish to express the importance of prompt congressional action. Mr.
Chairman, this controversy has troubled the communications industry
for nearly a decade. It continues to be a source of great conflict be-
tween the industries we regulate. We believe that it is time that the
Congress place the interests of these parties in balance and resolve
their differences through legislation. In this connection, we believe
that it is essential and altogether just that cable operators pay reason-
able cojiyright royalties. However, we express no judgment as to
what precise form this legislation should take.
In our comments on previous legislation, we have on several occa-
sions called attention to matters which we believed could be more
effectively handled through the flexible approach afl'orded by the
administrative process. In those comments we suggested that these
matters not be written into substanti\e law but left to agency dis-
cretion. We made those remarks in connection with provisions which
would have codified distant signal, minimum signal carriage, exclu-
sivity, and sports blackout policies.
We continue to feel strongly that matters of this nature are more
appropriately left to the Commission where they can evolve as the
cable industry matures. For these reasons we were pleased that the
Senate deleted provisions of this nature from S. 1361 of the 9od
Congress, and that the legislation now before your subcommittee
either omits reference to such regulatory matters or expresses them
in broad general terms within which we can exercise considerable
discretion. We are hopeful that any legislation which you report out
wil 1 conform to these guidelines.
Mr. Chairman, this concludes my remarks. I would be pleased to
respond to questions.
Mr. Kastenmeier. Thank you, Mv. Hardy. I wish to compliment
you on a very concise, coherent, and highly useful statement. We need
to be aware of the history of what has transpired as seen through
the eyes of the Commission.
Does the Commission, the Federal Communications Commission
authorize — it does authorize or give licenses for cable television?
]\ir. Hardy. Yes, sir. We issue certificates of complianr-e to cable
television systems once they are initially franchisee! by a local fran-
chising authority in the community in wdiich the cable system is to
operate.
Mr. Kastexmeier. The first reference you make is to 1959. At that
tune did you authorize or license them in any sense ?
Mr. Hardy. In 1959, no, sir. We did not at that time issue certif-
icates of compliance.
Mr. Kastenmeier. Did the Commission participate in any respect
whatsoever in either the United Artists-Fortnightly case, or the
CBi^-Teleprompter case as amicus curiae or otherwise ?
Mr. Hardy. No, sir, we did not participate in those proceedings
before the courts.
Mr. Kastenmeier. However, the Commission, I take it, it is the
view of the Commission that it differs with those decisions insofar
asi thev do not cause cable operators to pay reasonable copyright
royalties?
438
Mr. Hardt. I do not believe we differ with the decision of the Court
in that respect. I think that the Court pointed out that the 1909
legislation, the statute dating back to 1909, could not be construed
to cover the industries which developed subsequent to that legislation.
I am not sure that we agree with the Court's ruling, but we live with
the Court's ruling. The Court has concluded that that statute was not
adequate to cover the industry as it developed.
We do support at this time, as I have stated in our prepared re-
marks, some form of copyright legislation which would impose an
obligation on the part of the cablecasters to pay some reasonable
copyright royalties. The amount, the details of that legislation, we
w^ould leave to the expertise of Congress.
Mr. Kastenmeier. Ten years ago when the matter came before us
in the 1965 hearings the technique and the industry were commonly
known as community antenna television, CATV. Now, it is known
as cable television. From a service or technological standpoint, has
the industry changed in 10 years sufficiently for us to take some spe-
cial notice of that fact for purposes of copyrights ?
Mr. Hardy. Well, Mr. Chairman, as you know, originally com-
munity antenna television systems, as it originated, was intended only
to extend the signal which it could pick up over the air into the
homes of viewers which could not pick up that signal over the air
without a very large antenna. It was an antenna put in a location
where it could pick up signals off of the air and transmit them over
cable into those homes.
Tlie industry has since that time — the technology since that time
has developed which allows a cable operator to import from a distant
community a signal via microwave facilities, and it now imports from
very distant areas programing which would in effect fragment a local
broadcast station audience. And I think it is for that reason, the tech-
nological developments, that it has become more obvious that copyright
legislation is needed.
Mr. Kastenmeier. Just two other questions. One, your advice to us,
and I think it is very good advice, is not to be too specific, to stay
away from, insofar as we can, such questions as distant signal limited
importation, exclusivity, and sports blackout policies. And would you
also include the question of origination? You know, we actually con-
sidered that 10 years ago. To what extent does the then CATV origi-
nate, and should this have something to do with its copyright policy ?
Mr. Hardy. Well, I would also recommend I think on behalf of the
Commission, and I am speaking for myself, of course, because the
Commission has not taken any position in that sense, but the Miihrest
Video case was decided, and in the Midicest Video case it decided that
the Commission did have jurisdiction and authority to require a cable
system to originate programing. Since then, the Commission has had
some rulemaking as to whether or not it would be appropriate to impose
that obligation on a cable system at this time, because this industry is
developing. I believe that would he better left with the Commission,
with the administrative flexibility that is intended in the Administra-
tive Procedures Act, rather than to carve it into the stone of a statute.
I would recommend, on my own behalf anyway, that it would be my
advice to the committee that it would be left better to the Commission's
administrative flexibility.
439
Mr. Kastenmeier. My last question is, you are aware, of course, of
the provisions of H.K. 2223. That is to say, the form in which the Senate
passed the bill early last fall. Is that bill acceptable in all respects to
the Connnission ?
Mr. Hardy. Yes, sir. Insofar as it relates, as I began my testimony
here today, there are many parts of that overall bill which do not apply
to the areas regulated by the Commission, but insofar as that bill
touches upon the copyright obligations in the cable industry, it is
acceptable to the Conxmission ; yes, sir.
Mr. IvASTENMEiER. Thank you. I yield to the gentleman from Illinois,
Mr. Railsback.
Mr. Railsback. Yes. I take it what you are saying is you generally
favor the bill that is pending before us, and you especially appreciate
the fact that in contrast to earlier bills it provides certain latitudes
that those other bills did not provide ?
Air. Hardy. That is correct.
JNIr. Railsback. To your Commission ?
Mr. Hardy. Yes ; it does.
Mr. Railsback. Would you favor the FCC or the Copyright Office
itself administering the fee schedules, in making determinations there?
Mr. Hardy. I think that should be left with the Copyright Office.
Mr. Railsback. The Copyright Office, right. Are you satisfied that
the bill as drafted contains enough authority to permit you to deal,
with questions of embargoes or exclusivity and so forth ?
Mr. PIardy. Well, I think that the jurisdiction that the Commission
presently has under the Supreme Court decision in Southtuestem Cable
is adequate at present. However, I recognize that there are some bills
that have been submitted to both Houses of Congress which would
question the jurisdiction of the Commission in the cable area, and the
Chairman, I believe, has testified on that. And I am not thoroughly
familiar with his testimony in those areas, and I would prefer to defer
to his judgment on what legislation would be needed in the field of
jurisdiction for the Commission. I would prefer not to answer that.
Mr. Railsback. The FCC had promulgated certain rules l^efore.
How does the bill jibe with those rules that you promulgated earlier
af t^r the first court decision ?
Mr. Hardy. Well, I may not understand your question, Mr. Rails-
back. "VYliich rules are you referring to ?
Mr. Railsback. Well, I think, for instance, that you saw fit to regu-
late certain transmissions depending upon the area, the distance, and
am I right on that ?
]\Ir. Hardy. Distant carriage ?
Mr. Raii^back. Right.
Mr. Hardy. The number of signals allowed to be carried, things of
that nature ; yes, we have.
Mr. Railsback. Do you, or did you then, and how do you now foe!
about differentiating between the fee schedules as relates to, say, the
secondary transmissions within a local area carrying where the primary
transmissions reach? Do you think there should be a different fee
schedule depending upon the type or the distances involved ?
Mr. Hardy. I think that we would defer to the judgment of your
committee on that. We would leave that to the committee as to whether
440
or not a fee schedule should be made — the local signal as opposed to the
distant signal ?
^Iv. Railsback. Right. Exactly.
Mv. Hardy. I think the parties to the consensus agreement, who I
understand will be called on to testify before you
Mr. Railsback. Yes ; they will.
Mv. Hardy. Will be better able to respond to that, and perhaps they
could give you their suggestions. But insofar as the Commission is
concerned, we would defer to the judgment of your committee on that.
jMr. Railsback. Perhaps I am mistaken, but as I read the bill before
us we do not diiferentiate in the fee schedule.
Mr. Hardy. That is correct. The same fee would apply to all carried
signals, including distant.
Mr. Railsback. Including, as I understand it, including aural trans-
missions under subsection (c) (1) (A) ?
Mr. Hardy. That is correct.
Mr. Railsback. Thank you.
r^Ir. Kastenmeier. The gentleman from California, IVIr. Danielson.
Mr. Daxielsox. Mr. Chairman, I pass and retain my right to interro-
gate if I may, please.
]\Ir. Kastexmeier. The gentleman from Massachusetts, ]Mr. Drinan.
Mr. Drinan. Thank you, Mr. Chainnan. Perha])s we should not men-
tion the Office of Telecommunications Policy to a representative of the
FCC. But, I wonder if your recommendations are consistent with the
recommendations of the Cabinet Committee report in January 1974 of
theOTP?
Mr. Hardy. Father Drinan, I am not familiar with those, intimately
familiar with those. I know of them, and I am not sure whether our
testimony is consistent with them or not. I do not believe we studied
our testimony to compare it with that report to determine Avhether
it was consistent.
INlr. Drinan. It confirms my suspicion that the FCC and tlie OTP
were not talking very much to eacli otlier.
Would you point out anything in H.R. 2223 that either in your per-
sonal judgment or in discussions of the FCC that perhaps could be
modified ? In other words, we want as much help as we can get on the
specifics, and I know that you do not want to get into them. You say we
express no judgment as to what precise form this legislation should
take. But, could you give us any helpful suggestions as to whatever
conflicts might exist which could be resolved ?
Mr. Hardy. Father Drinan, I think maybe the parties may have
testimony that they will submit to you as they testify here before you,
and I think in weighing both sides of the issue as presented by those
parties you will be able to come up with whatever you believe a balanc-
ing of the equities between those parties.
: The Commission, insofar as its comments on the bill that was sub-
mitted to us, would be that we are in agreement with the general
principles, and we would leave the details to your committee.
Mr. Drinan. All right. Thank you, sir. I have no more questions
at this time.
. Mr. Kastenjieirr. The gentleman from New York, INIr. Pattison.
..'My. Hardy. Father Drinan, if I might, I would not like to leave this
recoi'd with the impression fliat there is no ono-oing discussions between
tlie FCC and the OTP.
441
]Mr. Drinan. No. No. I approve of no discussion.
Mr. Hardy. We exchanoe documents, as I am sure you are aware,
and comment on the documents submitted by both offices. We do not
always come down on the same side, and I am sure frequently do not,
particularly in the field of cable. I think there are, as you are well
aware, many differences of opinion between the FCC and the OTP.
]Mr. Drinax. You would not care to take another minute or two to
spell those differences out, would you ?
Mr. Hardy. I am sure that they are so complex that it would take a
great deal more than a minute.
Mr. Drinan. Thank you, sir.
Mr. Kastenmeier. Mr. Pattison.
Mr. Pattison". I also see potential conflicts in 3'our jurisdiction be-
tween the copyright law and the FCC's jurisdiction in the area of non-
duplication of signals and exclusivity and also in the area of the use
of translators, which we have not talked about. And I wonder if you
would just comment a little bit more about the problems. I realize that
the Southwestern case was decided and said that you have jurisdiction,
but that was in the absence of copyright law. Now, suppose we pass a
copyright law here that relates and governs cable, is that not going to
cause some jurisdictional problems between the FCC and the copyright
law?
]Mr. Hardy. I am not sure that we will have any problems with our
jurisdiction. If we were to feel that there were jurisdictional problems,
I am sure that M'e could submit to Congress proposed legislation to
clarify the jurisdiction of the Commission.
Insofar as this bill is concerned as it relates to the areas that you
just mentioned, that being the use of translators, the use of microwave
facilities, we do not believe that there is anything that you will be
carving into statutory stone which would affect our jurisdiction. Were
the courts to so construe your statute, then we would, of course, have
to come to Congress for some clarifying legislation.
Mr. Pattisox. My point is once the cable system is paying a copy-
right fee, as they are not now, then questions arise of how they can
use their license. It seems to me that our legislation is sort of in the
situation, that if then your legislation changes, in other words, your
rules change, then our legislation, to the extent that it was based upon
your legislation at that time becomes somewhat impractical.
Mr. Hardy. I can only say to you I know of no present rulemakings
which would affect it.
Mr. Pattison. Well, for instance, you establish a fee, for instance,
for cable opei'ators based upon the fact that they do have the non-
duplication rules. Assume that. And I do not suppose that it is going
to happen, but just for the purpose of argument, just as an example,
assume that you do away with your nonduplication rules. Then, of
course, the fee would have to perhaps be diff'erent.
Mr. Hardy. AVell, I know of nothing presently pending before the
Commission which would indicate the Commission anticipates remov-
ing exclusivity protection or nonduplication protection.
Mr. Pattison. That is not my point. The point is that it is obvious
a change in your rules will reflect upon the statute that we ultimately
pass, based upon the rules as they exist right now.
Mr. Hardy. I can only respond by saying, I suppose, Congress has
to adopt legislation based upon a situation as it exists, leaving as much
57-786— 76— pt. 1 29
442
flexibility as possible for future cliauge. I really do not know how to
respond to your question, Mr, Pattison, and I am not trying to evade it.
Mr. Pattisox. No. I understand.
Mr. Hardy. But I really do not know how to answer that. I can only
say to you that all that Congress can do is adopt legislation based
upon the present statute, and I Imow of no plans, I know of no pend-
ing rulemakings which would change the statute from the Commission
standpoint, from its regTilatory standpoint, so I don't Imow how to
respond to that, how you can leave that flexibility.
Mr. Pattison. I guess the problem is we are dealing in an area that
is so rapidly changing, the technology is so rapidly changing that
we cannot really foresee what kind of changes in technology will occur
and, therefore, what rules you are going to adopt in response to that
technology.
j\Ir. Hardy. I suspect that we have that same problem at the Com-
mission.
Mr. Pattison. So it would seem to me, knowing that there are prob-
ably going to be changes, that maybe we ought to think in terms of
building in some sort of a mechanism so that those changes can be
coordinated. I do not know how you do that.
Mr. Hardy. I am afraid that I cannot offer you any help because
I do not know how you would do it either, sir.
Mr. Pattison. Well, we will both think about it.
Mr. Hardy. All right.
Mr. Pattison. I have no further questions.
Mr. Kastenmeier. The gentleman from Illinois has another
question.
Mr. Railsback. Mr. Hardy, I wonder if joii could make available
to us the Commission's previous rules and orders concerning cable
television? Could you do that for the record?
Mr. Hardy. The rules they have presently ?
Mr. Railsback. Yes.
Mr. Hardy. Certainly. I am sure we can do that.
Mr. Railsback. I think that some have probably been superseded
or preempted. Have there not been a whole series of orders and rules ?
j\Ir. Hardy. Yes.
Mr. Railsback. I think that it would be helpful to me personally
to see all of them and the sequence.
Let me ask you this
Mr. Hardy. We will make those available to the committee, sir.
[The material referred to is in the files of the subcommittee.]
Mr. Railsback. Thank you. Was there ever an embargo of sports
transmissions that involved minor league franchise areas, or can you
give us a little bit of the background of that?
Mr. Hardy. I am afraid I do not know. Are you referring to sports
blackouts ?
]SIr. Railsback. Yes.
Mr. Hardy. That is presently pending before the Commission. It is
considering spoils blackout rules at the present. The Commission is
attempting to make those rules consistent with the intent spelled out
by Congress in the sports blackout legislation. We are trying to be
consistent with those, or at least that is what the Commission is dis-
cussing at present. As to the outcome of those blackout rules, I do not
know what those will be. They are presently being studied by the
443
Commission, and I understand they will come before the Commission
for discussion late this month or in early July.
Mr. Railsback. At one time I was led to believe that you were con-
sidering, the FCC was considering blacking out transmissions from a
distance where there was a minor league franchise. Is that correct?
Or do you recall ?
Mr. Hardt. Yes, it could have applied to minor leagues.
^Ir. Railsback. Is that still under active consideration or what ?
]Mr. Hardy. The overall policy of sports blackout rules is under
considei-ation and being discussed, yes.
Mr. Railsback. Have there been any orders or rules as yeft promul-
gated ?
Mr. Hardy. Those are being studied, and the rules will be adopted
hopefully this year.
Sir. Railsback. Are you saying that you are looking for direction
from the Congress as to what a blackout policy should be, how much
it could encompass and whether it should affect minor league cities as
well as major league areas or what?
Mr. Hardy. I am sure that the Commission would welcome any
direction that Congress may wish to offer on that. We, at present, are
operating off the statute that was adopted by Congress. We report
annually on the effects in professional sports. But of course, we do
not know what the effects, we have no data which we could study on
the effect on minor league sports.
INIr. Railsback. Let me ask you one other question. I think maybe
you referred to the people that are involved, but I am not sure, I am
not sure that that is going to be very helpful to us, and maybe your
testimony might be more helpful. Do you personally believe, based
on your experience or the Commission's experience, that this should
be a different fee schedule depending upon, or that there should be
some flexibility in a fee schedule taking into account the different
distances and the different problems that may be involved in cable
television.
Mr. PIardy. I am not sure that the Commission has taken a distinct
position on that. We support the present bill which applies the same
fee schedule regardless of the distance from which the signal is im-
ported, be it a local signal or a distant signal which is imported. The
Commission supports at the present time the present bill that was
presented to us in its general form.
Mr. Railsback. Thank you.
Mr. Hardy. And would apply it equally.
Mr. Kastenmeier. Mr. Hardy, on behalf of the committee
Mr. Danielson. Mr. Chairman, I have two questions if I may.
Mr. Kastexmeier. The gentleman from California, j\Ir. Danielson.
Mr. Daxielsox. I am interested in the theory undej' which your
Commission asserts jurisdiction for the regulation of cable. As I
understand it, you feel that you have that right in order to protect
television licensees from the economic threat of competition which
niight impair their ability to render their public service under their
license; and conversely, in order to protect, to promote the develop-
ment and health, economic health of local television stations. Aside
from that, what basis of jurisdiction does FCC feel that it has regard-
ing cable?
444
Mr. Hardy. The basis for the jurisdiction, as you stated, and as
found by the Supreme Court, is based uj)on the responsibility that the
Commission has to insure that this Nation has an efficient and wide-
spread radio and television system.
Mr. Danielson. Well, on cable — we are not really worried about
radio really, are we, particularly?
Mr. Hardt. Well, when I say radio, radio as defined includes tele-
vision, because the Commission is a
Mr. Danielson. But I am only speaking about television here, and
can we agree on that ? Now, proceed.
Mr. Hardy. Now, I was trying to answer your question insofar as
it relates to the theory upon which the Commission asserted jurisdic-
tion, and that was the theory as you stated, and that was approved
by the Supreme Court. The theory is ithat if you lose the local service
from a television broadcaster, then you have undermined the con-
gressional intent to insure a nationwide, efficient, widespread radio
system. And I use radio again in the sense that it includes television.
And that was the theory approved by the Supreme Court.
Mr. Danielson. And of which I can understand the rationale and
the logic, and I have no problem. Do you have any other basis ?
Mr. Hardy. And I think the words used were "reasonably ancillary."
Mr. Danielson. Do you have any other basis ?
Mr. Hardy. Any other basis for your legislation ?
Mr. Danielson. For asserting jurisdiction to regulate cable?
IVIr. Hardy. That is the extent. That is the extent of the rationale
supporting our assertion of jurisdiction.
Mr. Danielson. Then 1 guess your answer is no, you have no other
basis ?
Mr. Hardy. That is correct.
Mr. Danielson. What does copyright have to do with either pro-
tecting existing television from an economic competitive threat, or
the promotion of local television broadcasting ?
Mr. H!ardy. I am not sure that I know the answer to that.
Mr. Danielson. I did not think you did. Thank you very much
That is all of my questions.
Mr. Kastenmeier. Thank you, Mr. Hardy, for your appearance this
morning. And we appreciate the help you have given us.
[The prepared statement of Asliton K. Hardy follows:]
Statement of Ashton R. Hardy, General Counsel, Federal Communications
Commission
Mr. Chairman, I am pleased to have the opportunity to present the views of
the Federal Communications Commission with respect to H.R. 2223, a bill for
the general revision of the copyright law.
The Committee is to be commended for addressing the very serious need for
comprehensive reform of our federal copyright laws. As you know, the statute
governing this subject was enacted in 1909 and was drafted in terms of the
problems of that era. Motion pictures and sound recordings as we now know
them were not envisioned at that time, nor were radio and television.
Mr. Chairman, I realize that the scope of this legislation is broad and that
your Subcommittee is concerned with such diverse subjects as library photo-
<!opying, bootlegging of film and sound recordings, and the ownership of presi-
dential documents. The Commission has no jurisdiction over matters such as
these and consequently I will not comment on them. However, the Commission
has asserted jurisdiction and promulgated comprehensive rules governing the
cable television industry, the subject of Section 111(c) and (d) of the proposed
445
legislation, and thus my testimony addresses some of the background of the
cable copyright problem.
Cable television is among those forms of communication which were not fore-
seen or provided for in the 1909 Act. For this reason a complex controversy arose
over the copyright liability of cable systems. I would like to trace briefly the
evolution of this controversy and the Commission's involvement in it.
When the first cable systems began to operate, most merely extended local
television service to rural areas where it had not been previously available.
They did not import distant signals into markets where television service al-
ready existed, nor did they originate programming or serve major metropolitan
areas. For these reasons, broadcast licensees did not anticipate that the new
industry would pose the copyright problems that now exist. Similarly, copyright
proprietors were generally unconcerned about the growth of cable because they
continued to receive royalties from conventional broadcasters and did not
anticipate that CATV would affect this revenue.
Initially the FCC expressed reluctance to assert jurisdiction over cable in
the absence of specific legislative authorization. In 1959 (26 FCC 402), the
Commission ruled that cable systems could retransmit programs without the
express authority of the originating station. We reasoned that cable was merely
a means of extending television service and did not pose an economic threat
to the broadcast industry. Pursuant to this ruling cable operators were free to
distribute programming without paying copyright royalties.
However, the attitude of the various parties changed abruptly when cable
systems began to import distant signals, originate programming, and provide
service in metropolitan markets which posed clear competitive threats to broad-
casters. Copyright questions then came into focus and broadcasters and copy-
right proprietors sought protection from the FCC and the courts.
The Commission responded by abandoning its former laissez-faire posture^
on cable and in 1962 denied a cable system permission to import additional dis-
tant signals by microwave. [Carter Mountain Transmission Corp., 32 FCC 459,
aff'd, 321 F. 2d 359 (D.C. Cir.), cert, denied, 375 U.S. 951 (1963)]. The Com-
mission was influenced in its decision by the fact that the proposed importation
would pose an economic threat to a television licensee which could deprive the-
public of his service.
In 1965, the Commission further asserted its jurisdiction over cable in itg=
First Report and Order on Cable Television (38 FCC 683) which contained the
so-called Non-Duplication Rule. This rule manifested the Commission's desire^
to protect the public interest in existing television service, and to encourage-
the development of local broadcast stations. It prevented duplication of the-
originating station's signal on a cable system for a certain period before and
after carriage by that station. Under the rule, a copyright proprietor could
limit the time and area in which a program was shown and a broadcaster could
present programming previously shown on a network on a delayed basis without
running the risk of losing his exclusivity to a cablecaster.
The Commission's Second Report & Order [2 FCC 725 (1966)], required that
all new cable systems in the top 100 television markets (serving 90% of all
television viewers) obtain FCC approval before importing new distant signals.
Approval was conditioned upon a finding that the new service would be con-
sistent with the establishment and healthy maintenance of television broadcast
service in the area. The effect of the rule made it virtually impossible for cable
systems to establish new service in urban markets.
Subsequently, a San Diego cable operator challenged the Commission's author-
ity to bar expansion of its system under the major-market-distant signal rule.
However, the Supreme Court upheld the Commission's action as reasonably
ancillary to its duty to regulate television broadcasting. [U.S. v. Southicestern
Cable Co., 392 U.S. 157 (1968) ]
Because FCC regulation had not addressed many of the copyright questions
posed by the advent of cable, broadcasters and cable proprietors sought relief in
the courts. They argued for an expansive interpretation of the Copyright Act
which would include a cable broadcn>;t as a "public performance" and thus sub-
ject cable operators to copyright liability. The Sitpreme Court confronted this
issue in FortniffJithj Corp. v. United Artists Television, Inc., 392 U.S. 290 (1968),
where United Artists sought to recover royalties from Fortnightly, a West Vir-
ginia cable system which imported into its market signals which could not be
received through ordinary over-the-air means. Fortnightly argued that it pro-
vided merely a reception service, did not "perform" and therefore escaped lia-
446
bility. In finding for the cable system, the Court employed a functional test under
which it held tliat the cable system was a "viewer", not a "performer." Since
"viewing" fell short of infringement, no liability was incurred. Implicit in the
Court's opinion was the view that Congress is better equipped than the judiciary
to strike an appropriate balance among the various competing interests.
The Commission then issued proposed general rules for cable operation [15
FCC 2d 417 (1968) ]. This proceeding served as a catalyst for serious discussions
concerning the manner in which the industry should be regulated. As this lengthy
proceeding neared its close, the Commission forwarded a Letter of Intent on
August 5, 1971, to Congress which outlined its plans for the near-term regula-
tion of cable. In our letter, we acknowledged the argument raised by several
.parties that we should defer promulgating rules governing cable until new copy-
right legislation was enacted. In response we expressed the view that cable
regulation and copyright could be separately considered. Accordingly, we urged
the Congress to promptly enact a copyright statute and stated our intent to
proceed with rulemaking. Among the rules outlined iu our letter was a solution
to the distant signal problem which would permit limited importation of such
signals based upon a formula geared to market size, and a provision allowing
program exclusivity in the top 100 markets.
In our letter, we encouraged industry principals to agree upon a schedule of
royalty fees in negotiations then in progress. The result of these negotiations
was the so-called "Consensus Agreement" whicli suggested certain revisions to
the proposal advanced in our Letter of Intent and pledged the parties to support
sepai'ate cable copyright legislation. The legislation Avas to establish a system
of copyright liability for cable carriage of broadcast signals vsdth compulsory
licensing of signals authorized by the Commission. A schedule of royalty fees
or other payment mechanism was to be agreed upon by copyright proprietors
and cable operators. In the absence of agreement, the parties agreed to submit
to compulsory arbitration.
The Commission found the provisions of the Consensus Agreement to be
reasonable. Consequently, those aspects of the Agreement subject to our juris-
diction were implemented in our first comprehensive cable rules issued in 1972.
(36 FCC 2d 143). We took this action believing that it would open the door to
cable development and that copyright legislation would be enacted shortly
thereafter. Unfortunately, the negotiations concerning fee schedules proved in-
conclusive, and compulsory arbitration has not been forthcoming. Thus, legisla-
tive efforts in this area have been stymied.
The importance of a prompt resolution of the copyright problem was height-
ened by a second ruling of the Siipreme Court on the cable copyright issue. In
CBS V. Teleprompter, 415 U.S. 394 (1974), a Teleprompter cable system imported
signals from as far as 600 miles from its service area (as opposed to Fort-
nightly "s 82 miles). It had also engaged in advertising not confined to program
origination channels and had interconnected with other systems for specialized
programming. Despite the disparity of distance and the presence of services
characteristic of broadcasting, the Court held that Teleprompter retained its
"viewer" status and had not "performed" under the Fortnightly rationale. Thus
it w\as not liable under the Copyright Act.
Seemingly announcing the end of its resilience to construe the Act to ac-
commodate changing conditions, the Court called upon Congress to enact reme-
dial legislation. Speaking through Mr. Justice Stewart, it said :
These shifts in current business and commercial relationships . . .
simply cannot be controlled by means of litigation liased on copyright
legislation enacted more than half a century ago, when neither broadcast
television nor CATV was yet conceived. Detailed regulation of these rela-
tionships, and any ultimate resolution of the many sensitive and impor-
tant problems in this field must be left to Congress. (415 U.S. at 414)
In view of the preceding analysis, it is clear that if a solution to the cable
copyright dilemma is to be reached, it will only be through Congressional
action. I will not rehash the details of the various attempts made in Congress
to enact legislation, for I am confident that they are better known to your
Subcommittee, Mr. Chairman, than they are to the Commission. Suflice it to
say that legislation has been considered by at least one house of Congress every
year for the last ten. Furthermore, I do not wish to offer detailed comments with
respect to the specifics of Sec. 111(c) and (d) of the legislation now before you.
Enactment of substantive copyright law is an area in which the Commission has
no jurisdiction and in which we must defer to Congressional judgment.
447
However, the Commission has expressed some general views gn the subject
which perhaps bear repeating in this forum. First of all, we wish to express
the importance of prompt Congressional action. Mr. Chairman, this controversy
has troubled the communications industry for nearly a decade. It continues
to be a source of great conflict between the industries we regulate. We believe
that it is time that the Congress place the interests of these parties in balance
and resolve their differences through legislation. In this connection, we believe
that it is essential and altogether just that cable operators pay reasonable copy-
right royalties. However, we express no judgment as to what precise form this
legislation should take.
In our comment on previous legislation, we have on several occasions called
attention to matters which we believed could be more effectively handled through
the flexible approach afforded by the administrative process. In those com-
ments we suggested that these matters not be written into substantive law but
left to agency discretion. We made these remarks in connection with provisions
which would have codified distant signal, minimum signal carriage, exclusivity
and sports blackout policies. We continue to feel strongly that matters of this
nature are more appropriately left to the Commission where they can evolve
as the cable industry matures. For these reasons we were pleased that the Sen-
ate deleted provisions of this nature from S. 1361 of the 93d Congress, and that
the legislation now before your Subcommittee either omits reference to such
regulatory matters or expresses them in broad general terms within which we
can exercise considerable discretion. We are hopeful that any legislation which
you report out will conform to these guidelines.
Mr. Kastenmeier. Next, the Chair would like to call Mr. Thomas
J. Keller who is the Acting- General Counsel for the Office of Telecom-
munications Policy in the Executive Office of the President.
We have your statement, Mr. Keller, and if you like you may pro-
ceed from it or proceed as you wish.
TESTIMONY OF THOMAS J. KELLER, ACTING GENERAL COUNSEL,
OFFICE OF TELECOMMUNICATIONS POLICY, EXECUTIVE OFFICE
OF THE PRESIDENT
Mr. Keller. Mr. Chairman, members of the subcommittee, I am
pleased to respond to your invitation to discuss the views of the Office
of Telecommunications Policy on H.R. ^223, the copyright revision
bill.
My remarks today are limited to those sections of the bill which
address the question of copyright payments by cable television sys-
tems. At the outset, I wish to say that OTP fully endorses the principle
of copyright payment for the cable retransmission of broadcast orig-
inated programming. Before discussing the rationale behind this posi-
tion, it may be helpful to place the cable-copyright question in an his-
torical context.
The cable television industry began in the late 1940's as a means of
bringing improved television reception to isolated communities in the
mountainous regions of Pennsylvania and Oregon. Although this serv-
ice spread rapidly in many small towns throughout the Nation, cable's
telecommunications capacity was quite limited in its early days.
With the development of new technology increasing the potential
capacity of a cable system to 20 television channels or more, cable en-
joyed increased growth during the 1960's. Many new systems provided
not only improved reception of nearby broadcast stations, but also
began to originate television programming and to import additional
448
broadcast signals by means of microwave links from distant cities.
Today, there are over 3,000 cable systems serving approximately 10
million cable subscribers.
As cable's capacity to increase signal availability in local markets
became apparent, the broadcast industry, fearing shifts in established
viewing patterns, began to sit up and take notice. Similarly, the pro-
gram production industry became concerned that cable's importation
of programs from distant markets could diminish the value of those
programs when they were subsequently offered for sale to broadcast
outlets in the market served by a cable system.
By 1966, the Federal Communications Commission had asserted
jurisdiction over cable systems, primarily with respect to the retrans-
mission of broadcast signals. Unable to resolve the issues of potential
competition between cable and broadcasting, the FCC imposed a vir-
tual freeze on cable expansion in the top 100 markets. In so doing, the
Commission noted that cable's use of broadcast signals without reim-
bursement to program owners had a direct bearing on the cable-broad-
cast controversy. Thus, the copyright question became intertwined with
communications policy issues regarding the competitive relationship
between cable and broadcasting.
During this same period, the program production industry insti-
tuted law suits against cable operators for copyright infringement. Al-
though the Supreme Court ultimately ruled that cable Avas not liable
for copyright payments under a narrow reading of the Copyright Act
of 1909, the Court also stated that Congress should take a fresh look
at conforming the copyright law to new technological developments
that were not envisioned 60 years ago. In this regard, the Court noted
this issue had already become a subject for congressional consideration
as part of the overall copyright revision that had been underway for
several years.
The Office of Telecommunications Policy first confronted the cable-
copyright issue soon after its creation. The Office was created in 1970.
In June 1071, the President appointed a special committee to develop
proposals for a comprehensive national policy on cable communica-
tions. The committee, chaired by the Director of OTP, recognized at
the outset that cable technology offered a major solution to the problem
of channel scarcity that is inherent in our present system of television
broadcasting.
Unlike over-the-air broadcast technology which, because of spectrum
limitations, permits only a limited number of channels in a given com-
munity, cable technology permits an abundance of channels. The Cab-
inet committee viewed cable as something far more than a mere vehicle
for retransmitting broadcast signals; rather it saw cable as a tech-
nology with the potential to evolve into a medium of communication
in its own right, offering new opportunities for access by the public to
the electronic media, and new outlets of expression for program pro-
ducers, advertisers, and virtually anyone who wished to convey a
message.
In essence, cable's traditional retransmission service was seen as an
adjunct to the provision of a multiplicity of channels that could be
leased for a broad range of uses. It was apparent, however, that the
public would receive the full benefits of cable's potential only if the
medium were afforded a fair opportunity to develop and compete with
449
existing media, free of unwarranted governmental restrictions. To this
end, OTP is preparing cable legislation which will establish a national
plan and regulatory framework for cable communications based on
the recommendations of the Cabinet committee.
Similarly, it was evident that the unresolved copyright question
had been a factor in inhibiting the growth and development of cable,
and had made the integration of cable into the television program dis-
tribution market most difficult. Accordingly, the report of the Cabinet
committee, published in January 1974, included a recommendation that
cable be subject to copyright liability. The committee felt that program
retailers leasing cable channels should negotiate and pay for the right
to use programs and other copyrighted information just as entrepre-
neurs in other media are required to do. The committee also recom-
mended that cable system operators which retransmit broadcast sig-
nals should be subject to copyright payments in the form of a statutory
compulsory license.
These recommendations were grounded on principles of equity, as
well as general copyright theory and communications policy consider-
ations. The purpose of copyright protection, under the Constitution,
is to ensure that authors receive the encouragement they need to create,
as well as the remuneration which they fairly deserve for their crea-
tions. Cable systems, in their retransmission of broadcast signals, make
profitable use of copyrighted works and should therefore be subject to
some form of payment. Moreover, only when cable is obligated to the
payment of copyright can the argument of cable's "unfair competi-
tion" with broadcasters be put finally to rest.
As you know, Mr. Chairman, the question of the form that cable's
copyright payment ought to take has been a subject of continuing con-
troversy for many years. Numerous proposals have been put forward
attempting to distinguish among various types of signals. But these
previous proposals have failed for lack of agreement between the
principal industries, and it now appears that a blanket compulsory
license has gained the widest acceptance among the parties.
In 1971, faced with the cable "freeze" and the fact that the cable-
copyright issue was an integral part of the competitive disputes be-
tween the cable and brondcnst media, OTP encouraged representa-
tives of the principal industries — namely, cable, program producers
and broadcasters — ^to reach some form of agreement on copyright pay-
ment. The resulting "consensus agreement," providing for elimination
of the freeze, and the promulgation of the FCC's present cable rules
had, as a central provision, the agreement of all parties to support
copyright legislatioii in the form of a compulsory license for cable's
carriage of local and distant signals. The bill before you today incor-
porates such a provision and, although not a perfect answer to all
aspects of the issue, we believe it provides a reasonable and workable
solution to the problem.
Beyond our belief that payment of copyright fees by cable systems
is in accord with traditional copyright principles of incentive and
fairness for program producers, OTP also looks to copyright legisla-
tion to afford stability and certainty where previously there has been
none. In this regard, we are concerned that the affected industries not
be forced to revisit the uncertainties and disputes which now preoccupy
them. While OTP takes no position on the particular fee schedule that
450
is incorporated in the bill, we recognize that Congress is writing on a
clean slate here, without the benefit of prior experience with cable-
copyright payments, and that it may be necessary to adjust the fee
schedule in the future on the basis of additional experience and data.
We do feel, however, that the provision in the present bill which
allows the Copyright Tribunal to commence adjustment of the license
fees as early as 18 months after enactment could undermine the cer-
tainty and stability which the bill would otherwise provide.
In summaiy, Mr. Chairman, OTP believes that the question of
cable's liability for copyright has occupied and diverted the attention
of major industries and all branches of Govermiient for too many
years. It is essential for copyright legislation to be enacted soon ; first,
because television program producers will thereby receive fair com-
pensation for cable's profitable use of their product ; and, second, be-
cause it is time to put the question to rest so that cable may grow and
develop in response to the needs and demands of the public. In short,
we believe that copyright legislation is a necessary prerequisite to full
realization of cable's promise of additional channels, expanded serv-
ices, and a multiplicity of outlets available for the people of this
Nation.
That concludes my prepared statement, Mr. Chairman. I would be
pleased to answer any questions that you or other members of the
subcommittee may have at this time.
Mr. IvASTENMEiER. Thank you very much, Mr. Keller.
Is there anything which the preceding witness, Mr. Hardy, said in
behalf of the Federal Communications Commission, which represent-
ing the Office of Telecommunications Policy, you would not endorse?
Mr. Keller. As to the position of the Commission on the bill before
the committee today, I believe that the OTP and the FCC positions
coincide perfectly. Basically, we feel, as does the Commission, that
we do not have the expertise to address the specifics of the various pro-
visions of section 111, but we do endorse the general principle of cable's
payment of copyright.
Mr. IvASTENiviEiER. Your statement is somewhat more enthusiastic
than that of the FCC in terms of endorsing cable television's future.
I do not know whether that describes any real difference in policy or
attitude.
Mr. Keller. I think that the reason for that, Mr. Chairman, is prin-
cipally the result of our having provided staff support for the Cabinet
Committee on Cable Communications. As I indicated, we became inti-
mately involved with the cable issue, not in terms of the service pres-
ently being provided by cable, but in terms of cable's long-range po-
tential and, indeed, this is one of the charters of the Office of Telecom-
munications Policy, to look further down the road. And we see cable
as something far more than a mere retransmission system. We see it as
a vehicle for providing an abundance of channels for all kinds of
communications uses.
Mr. Kastenmeier. Just for my own benefit, about 20 years ago there
was a discussion of the prospect of what was then called pay TV. But
what we were really confronted with, I think, in 1965 was a different
system called community antenna television which did not have orig-
ination for the most, part, and was a retransmission system. But, pres-
ently cable, with the potential you allude to, suggests it is more like
451
the pay TV of 1955. Would you not agree? What difference is there
between a cable television of 1975 and the paj TV proposals of 1955 ?
Mr. Keller. I do not see much difference in terms of economics and
viewer choice between the two, except that the pay TV expenence of
1955 was an over-the-air broadcast subscription television technology,
which, like conventional broadcast technology, was limited as to the
number of channels that could be made available. With over-the-air
subscription TV you might have one such outlet in a given community.
Cable can provide any number of channels that might be made avail-
able for originated programing or programing that is provided by a
program retailer who merely leases the channel from the cable opera-
tor, to be made available to subscriber either on a pay-as-you-go basis
or an advertiser-supported basis or a combination of the two.
Mr. IvASTENMEiER. Returning to the bill itself, while you generally
support the bill, you indicate that it is not a perfect bill. And refer-
ring to imperfections, you do mention one area, and that is that you
feel that the Tribunal's consideration of the fee schedule comes toa
early if it comes 18 months after enactment.
;^Ir. Keller. Eight. As I read it — I believe it is section 801 or 802
Mr. Railsback. 802.
]\Ir. Keller [continuing]. The Tribunal would be empowered tc
reconsider the fee schedule eveiy 5 years, except for the initial such
reconsideration, which could commence, as early as 18 months after
enactment. Our view is that the copyright question has inhibited cable
development and has clouded the whole question of the appropriate
regulatory approach to cable for so long that there should be a period
of stability before controversies arise again in terms of how a new fee
schedule ought to be structured.
Mr. Kastenmeier. And that is said without respect to whatever the
Tribunal might do ; that is, raise fees or lower fees?
Mr. Keller. Whether it might raise, lower, or whatever ; right.
Mr. Ivastenmeier. Is there any other area that could be perfected
in the bill other than that point ?
Mr. Keller. That was really the only point about which we felt
strongly enough to address. When I say that it is not a perfect solu-
tion, obviously the various industries would like to see changes. But
in terms of our overall attitude toward section 111, we do not have
any major problems.
Mr. Kastenmeier. Thank you.
The gentleman from Xew York, Mr. Pattison.
Mr. Pattisox. I have no questions.
Mr. ICastenmeier. The gentleman from Massachusetts. Mr. Drinan.
jMr. Drinan. Yes. Thank you very much, sir, for your statement.
And you indicate that your organization is, in fact, preparing legisla-
tion. When will that be ready ?
Mr. Keller. That legislation has been in the preparation stage for
about a year now, Father Drinan.
Mr. Drinan. A year and a half, since January 1974.
IMr. Keller. Well, that is fair enough.
Mr. Drinan. OK. Wlien will it be out ?
Mr. Keller. We hope it will be out within the next several months.
Mr. Drinan. Next several months ?
Mr. Keller. That is, as I say, our hope.
452
Mr. DRiNAisr. We hope to act upon this in the next several days.
Mr. Keller. I would say this, that the cable legislation being pre-
pared by our office to implement the recommendations of the Cabinet
Committee can be considered wholly separate and apart from the copy-
iight question, which is being considered by this subcommittee.
Mr. Deinan. Then it would not help us at all ?
Mr. Keller. It does not address the question of copyright pay-
ments. In fact, it presumes that copyright liability by cable systems
would be handled by the copyright revision bill.
Mr. Drinan. You say OTP is preparing cable legislation which will
establish a national plan and regulatory framework for cable com-
munications based on recommendations of the Cabinet Committee. And
you can do all of that without referring to copyright ?
jNIr. Keller. One of the recommendations of the Cabinet Committee
was that the cable be subject to copyright payment. We presumed that
that recommendation would be implemented by passage of section 111
of this bill or something like it. We do not contemplate addressing the
copyright question in the cable bill we are drafting, which basically
is a bill to establish the regulatory and jurisdictional framework.
iMr. Drinan. So it is not relevant to what we are talking about at
all?
Mr. Keller. That is correct.
Mr. Drinan. So why did you put it in ? You had to say that OTP is
doing something ?
Mr. Keller. Not at all, Father Drinan. The reason we put it in is
because we see the growth of cable as an important factor in the de-
velopment of the communications capability of this country in terms
of service to the public.
Mr. Drinan. I think just everybody, you know, sees that. But do
you have anything to help us with ? I mean, you do not disagree at all
-with the FCC, and I assume that you did not talk to FCC before com-
"ing here either, and you come here, two different agencies, one inde-
pendent which is supposed to have jurisdiction by statute oyer this
:anatter, and then you come and you do not tell us anything different.
;So, what are we supposed to learn from your presentation ?
jMr. Kellek. Well, I suppose you could learn tliat here are two
agencies of Government that endorse the general^ principle of copy-
right payment bv cnble and endorse the bill as it is before you now.
Mr. Drinan. Well, that does not help much unless you give some
.specifics. I did not mean to be too critical, bnt I just had hoped that
you people, after that report a year and a half ago, you know, Janu-
nvv 1974, that you would have developed some specifics that would
heln us Hth this tough problem. I thank you.
Mr. Danielson [presiding]. The gentleman from Illinois, Mr.
Railsback.
Mr. Ratlsback. Tlianlr you. Are there areas that are still innccessible
to television transmission like West Virginia or some of the rural
mountn inous areas, do you know ?
INIr. Keixer. There are some isobtpd communities that may well
have no access to a television signal at all.
As a mntter of fact, if I mav expand on that. OTP commissioned a
stndv bv Denver Research Institute to study the extent to which tele-
vision sienals were available in rural communities across the coimtry.
453
and tho study revealed tliat there were certain areas that had very-
little, if any, television service.
Mr. Railsback. How long a report is that? How long of a report
is that ?
Mr. Keller. I am not sure. It may go 50 or 100 pages.
Mr. Railsback. I wonder if you could make that available to us ?
Mr. Keller. Certainly.
Mr. Railsback. Let me ask you this : In your judgment, is there any
value to be derived from differentiating in fees for distant transmis-
sions as compared to local, and also perhaps the third case of areas that
are being serviced that do not really have access to the networks, or
you know, the television transmissions ? Do you think we should pro-
vide some degree of flexibility in your fee schedules ?
Mr. Keller. As you know, that proposal has been around for a
while. Various agencies, industry groups, and, indeed, this subcommit-
tee have attempted to somehow define what is a local signal versus a
distant signal. It is a very, very difficult question and you get into the
problem of overlaj^ping markets, into the
Mr. Railsback. Formulas, yes.
Mr. IvELLER. Formulas, the whole thing. And the position OTP has
taken, insofar as the principal industries here — the copyright people
and the cable people — have agreed on the general idea of a compulsory
license to cover all signals, is that for ease of administration, and to
avoid definitional problems and disputes, this certainly seems to be
the best way to go. I must say personally, in terms of logic and the
economics of television program distribution, it would seem that
possibly local signals ought not to be covered since the copyright
owner has sold the program for distribution to a particular com-
munity.
Mr. Railsback. Markets, right, local markets.
Mr. Keller. Right ; and the cable system merely enhances the re-
ception capability of the local viewer. Now, that can be differentiated
from the importation of a distant signal where the program owner
did not contemplate distribution in that market. As I say, once you
attempt to write that distinction into a law you get into all kinds of
jurisdictional and definitional problems, and for purposes of admin-
istration it seems that a compulsory license covering local and dis-
tant signals is the best solution.
Mr. Railsback. Thank you. That is all.
Mr. Danielson". Have you concluded ?
Mr, Railsback. Yes, I have. Thank you, Mr. Chairman.
Mr. Danielson. I have only a couple of questions. In response, in
effect, to the question of the gentleman from Illinois, I know there are
some areas where an ordinary television service is not available. Take
the island of Guam, for example. I think everything brought into
Guam has to be canned and is distributed thereafter by cable within
the island. You take cities like Bishop, Calif., Chester, Calif., Chad-
ron, Ne]:)r., and you have the same situation. Within some of our larger
cities there are areas which are in the shadow of large buildings, or
mountains or hills, and there is just no reception unless you have cable.
They have what is called Cold Water Canyon in Los Angeles.^ so
there is definitely a role to be played by cable, even within the existing
metropolitan area as well as in outlying areas.
454
I would like to have you tell me what is the primary role of the
Office of Telecommunications Policy? What is the function or the
purpose for which it was set up ?
Mr. Keller. Well, Mr. Danielson, it was set up in 1970 principally
in response to recommendations of subcommittees of the House and
Senate, a study by the General Accounting Office
Mr. Danielsox. But what is it supposed to do ?
Mr. Keller. Well, the issue of the telecommunications role of the
executive branch had been around for several years, and during the
fifties and the sixties it had been studied by the Congress, the GAO,
and the Budget Bureau.
Mr. Danielson. I am aware of that. But I would like to know
what is OTP's role, what is OTP supposed to do, and what is its mis-
sion in life ?
Mr. Keller. What these various study groups recommended was
there be an executive branch capability that would have the resources
a'nd tlie authority to do several things. Number one, to manage and
coordinate the Federal Government's use of communications; the
budget for which amounts to about $10 billion annually. There was a
need for some central coordinating group within the executive branch
to coordinate for the purpose of promoting sharing of systems and
eliminating duplication.
Mr. Danielson. OK. Now, what is the next point ?
Mr. Keller. The second function was to manage and assign that
portion of the radio frequency spectrum which is used by Government
agencies.
Mr. Danielson. Does FCC have nothing to do with that ?
Mr. Keller. The FCC has nothing to do with that, that is correct.
The FCC allocates and assigns the frequencies that are available for
the private sector.
Mr. Danielson. But those portions of the spectrum which go to the
Government are within the OTP, and they recommend to the Presi-
dent that they be assigned to a given agency, is that correct?
Mr. Keller. That is correct. And then the third function is to
formulate and develop long-range policy recommendations for the
use and development of telecommunications in this country. And this
applies to domestic as well as international communications, w^hether
they involve satellites, radio, television, telephone, telegraph, common
carrier, cable, or microwave.
Mr. Danielson. And you make those recommendations to whom ?
Mr. Keller. Basically the recommendations go in three directions.
First to the President, if the President wants advice on any given
issue.
Mr. Danielson. On anything, yes.
Mr. Keller. Involving telecommunications. Second, to the Con-
gress by way of recommended legislation, or by way of views and
recommendations on leofislation that has been introduced by someone
else. And third, to the FCC by way of advice and recommendations, if
you will, on some of the longer range policymaking and rulemaking
issues which the Commission is considering.
INfr. Danielson. All right. Now, in response to the questions by
Mr. Drinan, you mentioned that the proposed legislation which you
are working on, and which will be recommended, I presume, in the
455
next several months, that it has to do with structuring the areas to
be served by cable and the manner in which it is to be served, the
numbers of channels, et cetera, as opposed to in harmony I should
say, those functions performed by our regularly licensed broadcast-
ing systems ?
Mr. Keller. Well, the biU itself would not set forth the precise
standards and specifications. Principally what the bill would do
would be to make certain jurisdictional distinctions between non-
Federal and Federal regulation of cable.
At the present time, the FCC, State cable agencies as well as local
municipalities, all three regulate cable to one extent or another, and
there is a lot of overlap and duplication. The bill would attempt
to solve that problem and clearly delineate these jurisdictional
boundaries,
Mr. Danielson. I see. I recognize we are talking about copyright
in this committee.
Mr. Keller. Right.
Mr. Danielson. And copyright basically is the relationship be-
tween the owner of the property, the copyrighted item, music, liter-
ature, or whatever it may be, and the person who uses it. It is the
use of a person's property in programing. In the purest sense, it
really has nothing to do with the jurisdictional relationship between
television and cable, for example, although obviously it would have
some impact because if a cable system could use copyrighted pro-
grams without compensation to the copyright owner, they would be
in an economically advantageous competitive position with the TV
station which does have to pay a fee, and that is what we are going
to have to try to work out in this committee. But beyond that, I
question that your organization, with its mission, has anything at
all to do with copyright, even in the broadest interpretation of your
so-called charter. Copyright is a proprietary thing, who is paying
whom for use of whose property. And I think that is true of FCC
also. Do you have any comments on that ?
Mr. Keller. I agree wholeheartedly, Mr. Danielson. And as I tried
to indicate in my statement, OTP's involvement in the copyright
question was really ancillary to our involvement in the broader
question of cable development, and we addressed the copyright prob-
lem only by way of saying that it has to be solved if this issue of the
competitive relationship between cable and broadcasting is ever
going to be ironed out.
Mr, Danielson, I think it is essential that we resolve it, and that
is what we are working on. I am just trying to put my mind in
proper perspective. Just frankly what is the impact of the recom-
mendations that you have made and are making, and those also by
Mr. Hardy? I just sort of would like to know what is the point of
interest and how mucli weight should we give to the testimony and
so forth.
I do have one other little comment. I understood from your state-
ment that you think that there probably ought to be two standards,
your recommendation would be two standards of copyright pay-
ments, one for the original transmission area, and probably a dif-
ferent one for primary transmissions generated by the cable system ?
456
Mr. Keller. Yes. And we assumed that those primary transmis-
sions or program originations, if you will, would be performances
within the meaning of the general copyright law, and that section
111 only addresses the retransixdssion of programing on broadcast
stations.
Mr. Danielson. Again, your interest would only lie to the extent
that the origination, or the rebroadcast of or the importation of a
distant signal was in a broadcast area of licensed stations so that
you would have a competitive situation ?
Mr. Keller. I am not sure I understand that.
Mr. Danielson. As long as the cable is in new territory where it
is not in competition with the traditional broadcasting system, would
there be any competition ?
Mr. Iveller. No; which is not to say, however, there would be no
need for copyright payments.
Mr, Danielson. Of course. That is not any concern of yours within
your charter, right ?
Mr. Keller. As to the matter of payment to the copyright owner
for distribution of a program into an area that is unserved by broad-
casting, this is not within our communications purview.
Mr. Danielson. Thank you very much. You have been very helpful.
Are there any further questions of this gentleman ?
Mr. Railsback. Mr. Chairman, let me just ask one more.
Mr. Danielson. Yes.
Mr. Railsback. On page 5 of your statement you mention that
the Cabinet Committee thought that I tliink program retailers should
also negotiate and pay a fee. Xow, that is something different than
we have heard before if, in fact, you mean that they are paying a
separate fee from the cable television systems or companies, is that
right ? Is that a different suggestion ?
Mt. Keller. Yes; it is, Mr. Eailsback. Let me try to explain. Ba-
sically cable can perform three functions by way of delivery of pro-
graming to a subscriber. First, it can take a broadcast signal oft' tlie
air and retransmit it. We are saying for that service there should
be a compulsory license to compensate the copyright owner.
The cable system can also originate programs at its head-ends;
that is, it can go out and buy the rights to distribute a motion pic-
ture on its cable system, and in that case it would be acting just like
a broadcaster or network. It would go right to the copyright owner
or motion picture producer and buy the rights. And that is covered
under the general provisions of the copyright law.
Now, third, it could lease channel capacity to what you might call
a program retailer or a middleman. You or I might go to the motion
picture producer and buy the rights to the film, and then in turn
go to the cable operator and say, "I would like to lease one channel
on Thursday night for distribution of this movie," and pay the lease
rate charged by the cable operator.
Mr. Railsback. So you are not talking about retransmissions?
Mr. Keller. That is right.
Mr. Railsback. Thank you.
INIr. Danielson. You are really only talking about retransmis-
sion in the one instance, the first instance?
Mr. Keller. Correct.
457
Mr. Danielson. Tlie other two, if the cable operator buys a movie,
or buys the movie rights, whatever they may be, whatever compensa-
tion is involved is a part of a contract between the parties ?
Mr. Keller. Correct.
Mr. Danielson. And on the lease situation, the leasing of the line
he is really acting as a common carrier, a public utility simply pro-
viding a vehicle through which the lessor utilizes the channel for
whatever purpose, legitimate purpose we hope that he might have?
Mr. Iveller. Yes.
Mr. Danielson. So there is no copyright problem involved there?
Mr, Keller. That is right. It is only with respect to the
retransmission.
Mr. Danielson. And on retransmission we all know I think that
television stations earn their incomes from commercials, from selling
advertising. And one of the factors in determining the advertising-
rate is the number of viewers. If the number of viewers on the cable
system is included in the number of viewers under the Nielsen rat-
ings, or whatever you want to call them, could it not be argued
that perhaps the copyright owner is being compensated at that point
if you add another 5,000 viewers by cable, and those 5,000 are in-
cluded in the, sliall I say, guaranteed circulation of the TV station?
Do you not have a copyright payment ?
Mr. Keller. I certainly can be argued that you do, but you get into
all sorts of difficulties there with respect to which audience the ad-
vertising is directed toward or intended for, local and regional ad-
vertising and so forth.
Mr. Danielson. I realize, but again the marketplace, seller and
buyer of the program, can sit down and fight it out over the table
and decide what kind of a fee to pay ?
Mr. Keller. Yes ; they could.
Mr. Danielson. Fine. Thank you very much. You have been most
helpful.
[The prepared statement of Thomas J. Keller follows :]
Statement op Thomas J. Keixer, Acting General Counsel, Office of Tele-
com mxtnications Policy, Executive Office of the President
Mr. Cliairman, members of the Subcommittee, I am pleased to respond to your
iuvitation to discuss the views of the Office of Telecommuinications Policy on H.R.
2223, the copyright revision bill.
My remarks today are limited to those sections of the bill which address the
question of copyright payments by cable television systems. At the outset, I wish
to say that OTP fully endorses the principle of copyright payment for the cable
retransmission of broadcast originated programming. Before discussing the
rationale behind this position, it may be helpful to place the cable-copyright
question in an historical context.
The cable television industry began in the late 1940's as a means of bringing
improved television reception to isolated communities in the mountainous regions
of Pennsylvania and Oregon. Although this service spread rapidly in many small
towns throughout the Nation, cable's telecommunications capacity was quite
limited in its early days.
With the development of new technology increasing the potential capacity of
cable system to 20 television channels or more, cable enjoyed increased growth
during the 1960'S. Many new systems provided not only improved reception of
nearby broadcast stations, but also began to originate television programming
and to import additional broadcast signals by means of microwave links from
distant cities. Today, there are over 3,000 cable systems serving approximately
10 million cable subscribers.
57-786— 76— pt. 1 30
458
As cable's capacity to increase signal availability in local markets became
apparent, the broadcast industry, fearing shifts in established viewing patterns,
began to sit up and take notice. Similarly, the program productiom industry
became concerned that cable's importation of programs from distant markets
could diminish the value of those programs when they were subsequently offered
for sale to broadcast outlets in the market served by a cable system.
By 1966, the Federal Communications Commission had asserted jurisdiction
over cable systems, primarily with respect to the retransmission of broadcast
signals. Unable to resolve the issues of potential competition between cable and
broadcasting, the FCC imposed a virtual freeze on cable expansion in the top
100 markets. In so doing, the Commission noted that cable's use of broadcast
signals without reimbursement to program owners had a direct bearing on the
cable-broadcast controversy. Thus, the copyright question became intertwined
with communications policy issues regarding the competitive relationship be-
tween cable and broadcasting.
During this same period, the program production industry instituted law suits
against cable operators for copyright infringement. Although the Supreme Court
ultimately ruled that cable was not liable for copyright payments under a narrow
reading of the Copyright Act of 1909, the Court also stated that Congress should
take a fresh look at conforming the copyright law to new technological develop-
ments that were not envisioned 60 years ago. In fact, this issue had already
become a subject for Congressional consideration as part of the overall copyright
revision that had been underway for several years.
The OflSce of Telecommunications Policy iirst confronted the cable-copyright
issue soon after its creation in 1970. In June 1971, the President appointed a
special committee to develop proposals for a comprehensive national policy on
cable communications. The Committee, chaired by the Director of OTP, recog-
nized at the outset that cable technology offered a major solution to the problem
of channel scarcity that is inherent in our present system of television
broadcasting.
Unlike over-the-air broadcast technology which, because of spectrum limita-
tions, permits only a limited number of channels in a given community, cable
technology permits an abundance of channels. The Cabinet Committee viewed
cable as something far more than a mere vehicle for retransmitting broadcast
signals ; rather it saw cable as a technology with the potential to evolve into
a medium of communication in its own right, offering new opportunities for
access by the public to the electronic media, and new outlets of expression for
program producers, advertisers, and virtually anyone who ^vished to convey a
message. In essence, cable's traditional retransmission service was seen as an
adjunct to the provision of a multiplicity of channels that could be leased for
a broad range of uses. It was apparent, however, that the public would receive
the full benefits of cable's potentital only if the medium were afforded a fair
opportunity to develop and compete with existing media, free of unwarranted
governmental restrictions. To this end, OTP is preparing cable legislation which
will establish a national plan and regulatory framework for cable communica-
tions based on the recommendations of the Cabinet Committee.
Similarly, it was evident that the unresolved copyright question had inhibited
the growth and development of cable, and had made the integration of cable
into the television program distribution market most difficult. Accordingly, the
Report of the Cabinet Committee, published in January 1974, included a recom-
mendation that cable be subject to copyright liability. The Committee felt that
program retailers leasing cable channels should negotiate and pay for the right
to use programs and other copyrighted information just as entrepreneurs in other
media are required to do. The Committee also recommended that cable system
operators which retransmit broadcast signals should be subject to copyright pay-
ments in the form of a statutory compulsory license.
These recommendations were groimded on principles of equity, as well as
copyright and communications policy rationale. The purpose of copyright pro-
tection, under the Constitution, is to ensure tliat authors receive the encourage-
ment they need to create, as well as the remuneration which they fairly deserve
for their creations. Cable systems, in their retransmission of broadcast signals,
make profitable use of copyrighted works and should therefore be subject to some
form of payment. Moreover, only when cable is obligated to the payment of copy-
right can the argument of cable's "unfair competition" with broadcasters be
put finally to rest.
As you know, Mr. Chairman, the question of the form that cable's copyright
payment ought to take has been a subjct of continuing controversy for many
459
years. Numerous proposals have been put forward attempting to distimguish
among various types of signals. But these previous proposals have failed for
lack of agreement between the principal industries, and it now appears that a
blanket compulsory license has gained the widest acceptance among the parties.
In 1971, faced with the cable "freeze" and the fact that the cable-copyright issue
was an integral part of the competitive disputes between the cable and broad-
cast media. OTP encouraged representatives of the principal industries (cable,
program producers and broadcasters) to reach some form of agreement on
copyright payment. The resulting "Consensus Agreement," providing for elim-
ination of the freeze and the promulgation of the FCC's presemt cable rules
had, as a central provision, the agreement of all parties to support copyright
legislation in the form of a compulsory license for cable's carriage of local and
distant signals. The bill before you today incorporates such a provision and,
although not a perfect answer to all aspects of the issue, we beUeve it provides
a reasonable and workable solution to the problem.
Beyond our belief that payment of copyright fees by cable systems is in accord
with traditional copyright principles of incentive and fairness, OTP also looks
to copyright legislation to aiford stability and certainty where previously there
has been none. In this regard, we are concerned that the affected industries not
be forced to revisit the uncertainties and disputes which now preoccupy them.
TVTiile OTP takes no position on the particular fee schedule that is incorporated
in the bill, we recognize that Congress is writing on a clean slate here, without
the benefit of prior experience with cable-copyright payments and that it may
be necessary to adjust the fee schedule in that it may be necessary to adjust the
fee schedule in the future on the basis of additional experience and data. We
do feel, however, that the provision in the present bill which allows the Copy-
right Tribunal to commence adjustment of the license fees as early as eighteen
months after enactment could undermine the certainty and stability which the
bill would otherwise provide.
In summary, OTP believes that the question of cable's liability for copyright
has occupied and diverted the attention of major industries and all branches
of government for too many years. It is essential for copyright legislation to be
enacted soon, first, because television program producers will thereby receive
fair compensation for cable's profitable use of their product, and second, because
it is time to put the question to rest .so that cable may grow and develop in
response to the needs and demands of the public. In short, we believe that
copyright legislation is a necessary prerequisite to full realization of cable's
promise of additional channels, expanded services and a multiplicity of outlets
available for the people of this Nation.
That concludes my prepared statement Mr. Chairman. I woiild be pleased to
answer any questions that you or other members of the Subcommittee may have
at this time.
jMr. Danielson. "We have to move along. I find that we are over-
scheduled in the first place, and as is traditional with this committee
we are overqiiestioning in the second place. It is my fault, and I assume
responsibility. I am going to recommend that the next three witnesses
try to confine themselves with all of the self -discipline they can so that
we can at least give everyone a chance to appear, and I will try to
discipline myself.
Our next witness is Mr. E. Fulton Brylawski, chairman of the
Copyright Committee of the Bar Association for the District of,
Columbia.
Won't you please come forward and sit down, and pull np the
microphone and give us the benefit of all of your statement as quickly
as you can ? Thank you.
TESTIMONY OF E. FULTON BRYLAWSKI, CHAIRMAN, COPYRIGHT
COMMITTEE, BAR ASSOCIATION, DISTRICT OF COLUMBIA
Mr. Brylawski. Mr. Chairman, I am E. Fulton Brylawski, chair-
man of the Copyright Committee of the Bar Association of the Dis-
trict of Columbia and an attorney specializing in copyright and related
460
matters. My appearance and testimony today, however, is as a con^
cerned individual and not in my official capacity as chairman of the
Copyright Committee of the local bar association. At this point, I
ask that my formal statement be accepted and printed in the record.
And if I could, I will address myself from a rather truncated statement.
Mr. Danielson. Without objection, it is so ordered and I would
appreciate it if you would do that. You can truncate it very well I am
sure, and liit the high spots.
[The prepared statement of Mr. Brylawski follows :]
Statement of E. Fulton Bkylawski
Mr. Chairman. My name is E. Fulton Brylawski, Chairman of the Copyright
Committee of the Bar Association of D.C. and an attorney specializing in copy-
right and related matters. In my brief testimony here today, I hope to alert tlie
Subcommittee to a few constitutional disabilities of the copyright revision bill,
principally the bill's violation of the separation of powers doctrine underlying
the U.S. Constitution. Even the present method of administration of the copyright
laws by the Copyright Office seems to be a violation of this doctrine, bat any
doubt on this score would be eliminated by reason of the additional powers and
functions to be reposed upon the Copyright Office under the copyright revision
bill.
The doctrine of Separation of Powers is often mentioned but little understood.
Sometimes it is discussed as part of our federal system of checks and balances.
While our Constitution bears its imprint, it has rarely been formulated or applied
with any degree of specificity, so that it remains an amorphous and somewhat
illusive concept.
Recognizing the need to better understand and clarify the doctrine, the Senate
established in 1966 a subcommittee on the separation of powers, headed by
Senator Sam Ervin, with the general purpose of investigating the incursions
by any of the three branches of government into the constitutionally mandated
sphere of another. More specifically, the committee's inquiry was directed to the
problem of the exercise of emergency powers by the President in the absence of
legislative authorization, the need for more effective congressional oversight
of the interpretation of legislation by the judiciary and executive agencies and
the extent to which the executive branch may ignore mandates contained in
congressional legislation. Various methods of exercising legislative oversight of
executive activity were explored to remedy the supposed imbalance of power
between the legislative and executive branches. Yet, the subcommittee was also
concerned with congressional encroachment upon the executive function. Re-
gardless of the individual stance taken either for or against the extension of
executive power, it is interesting to note that no one questioned the validity or
vitality of the separation of powers doctrine.
Unfortunately, as a result of its primary concern with executive encroach-
ment, both Congress and the Ervin committee were guilty of a rather ironic
oversight. While seeking to use the doctrine as a means of reasserting legislative
power rightfully belonging to Congress, they failed to recognize that a sub-
department of the legislative branch, namely the Copyright Office, had been
poaching upon the executive function through its exercise of broad executive or
administrative powers. This problem promises to become more critical in the near
future since the Copyright Office, under the copyright revision bill now under
consideration, soon hopes to assume the full trappings of a regulatory agency.
Before examining the constitutionality of the revision bill, it seems appro-
priate to examine the Copyright Office under the present statute to determine
whether its current operation passes constitutional muster under the separation
of powers doctrine. Inasmuch as the legislative department through Congress en-
acts the copyright laws and the same department through the Copyright Office
administers or executes them, there is no separation between the legislative
power of enactment and the executive power of executing the copyright laws.
As a matter of fact, under the Copyright Act of 1870, Congress directly super-
vised the administration of the copyright law, so that substantially the same
legislative instrumentality enacted and administered the copyright lav/s. How
this rather patent violation of the separation of powers doctrine escaped the
attention of constitutional scholars is puzzling. What is perhaps clear, however,
461
is that the Copyright OflBce fonncl its way somewhat accidentally into the legisla-
tive department because copyright deposits provided a ready and clieap means
for enrichening the collections of the Library of Congress, which happened to
be lodged in tlie legislative department. As long as the Copyright Office per-
formed only a record-keeping or depository function for such copyright deposits,
it behaved in a library-like fashion and did not exercise enough power to attract
attention or raise any constitutional eyebrows. With its evolution and maturity
into a full administrative or regulatory agency, however, the Copyright Office
now seems confronted witli the constitutional question whether its adoption by a
legislative parent was legitimate.
Today, the Copyright Office operates substantially under the Act of 1909
with few minor amendments. An examination of the pre-1909 proceedings,
including the Librarian's conferences in 1905 to 190G, as well as the 1909 Com-
mittee Report prohibiting the Register of Copyrights from exercising any "judi-
cial functions", makes it extremely clear that our present copyright statute does
not empower the Register of Copyrights to decide and pass upon the copyright-
ability of worivs submitted for registration or to interpret the copyright statute
or to apply any such statutory interpretation to the facts of a particular copy-
right application. This conclusion was supported by the early text writers such as
Arthur Weil in his 1917 treatise "American Copyright Law", as well as by Con-
gressman Frank Currier, the congressional father of the Act of 1909, who was
Chairman of the House Committee on Patents at the time of the passage of
the Act of 1909 and its earlier deliberations. His views on the limited functions
of the Register of Copyrights as a record-keeper without the power of determining
copyrightablity are re-stated in the pre-1909 legislative proceedings as well as the
1912 hearings on the Morrison bill.
Nevertheless, the restraints imposed upon the Register's function under the Act
of 1909 have been eroded away or ignored. Perhaps, in obedience to Parldnson's
law or the institutional imperative and, despite Congressman Currier's admoni-
tion that the Copyright Office should not have an examining staff nor decide what
is copyrightable, the Copyright Office today has acquired an examining staiS
of approximately thirty lawyers as well as thirty-five non-legal examining special-
ists, and this staff decides what is copyrightable.
Thus, the Copyright Office has evolved from small beginnings of a depository
or registry office into a full-grown administrative agency, exercising rather sub-
stantial discretionary and interpretative powers, however they may be denom-
inated as judicial, executive or legislative. Perhaps, Congressman Currier
was wi'ong in his concept that the Copyright Office should be an office of registry
only. Possibly the 1909 statute should have been drafted to permit the broad ex-
ercise of administrative discretion and judicial interpretation which tlie Copy-
right Office daily exercises. To the extent that the Copyright Office has mis-
read the 1909 statute to deny copyright secured by a simple deposit and payment
of a fee and adopted instead the more traditional review and scrutiny of a team
of examiners as in the Patent Office, a serious question is posed whether the Act
of 1909 is constitutional if it authorizes this kind of copyright action. Particularly
germane to this constitutional inquiry is the fact that the Copyright Office is but
a division of the Library of Congress which in turn is part of the legislative
branch of the federal government. If the Copyright Office exercises broad ex-
ecutive and interpretative functions, then the legislative branch, which enacts
the L-opyright legislation, also would execute the same laws through its sub-
division, the Copyright Office. The executive branch of the federal government
would have notliing to do with the execution of the copyright laws. A court re-
view of a rejected copyright application would be available, but apparently
only in a limited proceeding in the nature of mandamus. The legislative branch
would thereby be a governmental hermaphrodite which does everything. No
other example of a more apparent violation of the constitutional separation
of powers doctrine can be found.
One of the features of the Copyright Office as a legislative subdepartment,
supposedly distinguishing it from an administrative agency such as the Patent
Office, is that the Copyright Office does not make any factual determinations as
part of its examining procedure. Actually, the current examining procedures
of the Patent Office and Copyright Office are not so dissimilar. Where the patent
or trademark examiner searches his own Office files to determine the eligibility
of an applicant for a patent or trademark, the Copyright Office now does very
much the same tiling with its own records. Where the Patent examiner has a
vCOllection or library of reference materials which he consults to determine the
462
propriety of approving a patent or trademark application, the Copyriglit Office
examiners similarly have developed a body of expertise, reference material and
collateral source material as a basis for approving or rejecting copyright appli-
cations. In some instances, the copyright examiners have conducted research in
the Library of Congress records and reference books having nothing to do with
copyright, primarily to determine whether the work involved has been pre-
viously published, whether the author is dead, or whether other information exists
which might make the particular copyright applicant ineligible for the copyright
claimed or might restrict him only to a more limited copyright. Clearly this
type of copyright examination is legally indistinguishable from the Patent
Office examination and the Copyright Office must thereby be performing an ex-
ecutive and/or adjudicative function similar not only to that of the Patent Office
but also to almost any other federal executive or administrative agency.
The broad power presently exercised by the Copyright Office is well illustrated
by a contemporary example. The present copyright statute includes no definition
of publication and makes no provision for copyright in sound motion pictures.
Moreover, no judicial determination has been made on how a motion picture.
or more appropriately a sovind track, might be published and none have com-
mented upon w^hether a sound ti'ack is a copyrightable portion of a sound motion
picture. Nevertheless, the Copyright Office has adopted a definition of publication
applicable to sound tracks as well as a new regulation that sound tracks are
copyrightable. If the copyright statute supports these interpretations, then the
Copyright Office would have exercised the broadest judicial power in its de novo
interpretation of the statute and, if these interpretations are not supported by
the statute, then the Copyright Office would have exercised a legislative function
in adding to the copyright law new provisions on publication and the copy-
rightability of sound tracks. That the Copyright Office may not share in nor
perform any such legislative or judicial function seems axiomatic and any attempt
to do so would seem a clear violation of the separation of powers doctrine.
Mindful that the Copyright Office may now be acting in violation of its
constitutional and statutory authority, it is appropriate to examine the copyright
revision bill to determine what, if any, new constitutional problems may thereby
be created. Under the Act of 1909, a rather modest and ambiguous rule and
regulation power was given to the Register of Copyrights, apparently only to
facilitate the internal administration of the Copyright Office. The revision bill,
however, would vest in the Register explicit and new discretionary and regulatory
powers, which would exacerbate the constitutional problems of the present law.
One feature of the bill goes even further by creating within the Copyright Office
a Copyright Royalty Tribunal which would have the authority to decide disputes
with respect to the distribution of royalties and to establish new royalty rates
from time to time on cable TV, jukeboxes, phonorecords and possibly perform-
ances if S. 1111 or its equivalent is adopted by the Congress. This Tribunal would
provide for an on-going method of rate adjustment without recourse to Congress
and this objective is laudable. However, a very restricted court review of these
rate determinations is provided in the bill, generally limited to fraud, and
excluded from this review would be the customary complaint that the adminis-
trative determination is unsupported by the evidence, is arbitrary or capricious or
suffers some other legal irregularity.
The new rate-making function vested by the revision bill of the Copyright
Office would be substantially indistinguishable from the rate-making activities
of certain agencies in the executive branch as the ICC, FPC and CAB. Rate-mak-
ing has always been deemed a legislative function. Delegation of the legislative
power to establish rates has been permitted to the executive branch but only
within clear and rather narrow guidelines. Yet, no delegation of a legislative
authority has ever been sanctioned to a congressional subdivision, not even a
congressional committee, much less to a body not constituted of elected repre-
sentatives such as the Copyright Office. Hence, the rate-making function of the
Copyright Royalty Tribunal would involve a clear unconstitutional delegation of
legislative power as would compound the serious constitutional disabilities of
the present copyright law under the separation of powers philosophy.
Actually, it should be self-evident that the copyright revision bill is uncon-
stitutional. The net result of the revision bill would be to weld the enactment,
execution and judicial review of the proposed copyright law into a function
administered almost entirely within the legislative branch of government, pro-
viding no participation by the executive branch and only a very limited review
by the courts. If this combination of functions be constitutional, then there
463
would be no legal prohibition against Congress transferring from the executive
to the legislative fold all of the functions of the Patent Office, SEC, ICC, FTC
and virtually any other administrative or executive agency of the federal govern-
ment.
Apart from constitutional disabilities under the separation of powers doctrine
and improper delegation of legislative power, the copyright revision bill may be
unconstitutional as a denial of due process under the 14th Amendment. Under
§ 809 of the copyright revision bill, the scope of judicial review of royalty distribu-
tion has been substantially limited to matters amounting to fraud or corruption
and judicial review of royalty rate determination has been ignored. It is true that
the Congress may limit judicial review of an administrative agency except where
constitutional questions are raised. Yet, the rationale of such a limited review is
that all the parties would have their day in court in a quasi-judicial proceeding
before the particular administrative body. Here, the Copyright Royalty Tribunal
would be part of the legislative branch and it cannot be admitted that the pro-
ceeding before it would be either administrative or quasi-judicial without doing
some violence to the separation of powers doctrine. Even if we were to ignore
this problem, there is nothing in the copyright revision bill which would provide
the due process safeguards of notice and hearing, and because a legislative siab-
department would not fit the definition of "agency" under the Administrative
Procedure Act, the procedural safeguards of that Act would be inapplicable.
It would be exceedingly fatuous of me to assume that I can do anything more
than merely scratch the surface of these complicated issues within the brief span
of time allowed and I respect the reasons why more time is not available. However,
having stated the problem, I would at least like to briefly offer one possible solution
apart from restricting the Copyright Office to its original function as a depository
or registry office. A reasonable alternative would be to remove the Copyright
Office from the Library of Congress and the legislative department and to re-
establish it in the executive branch of the federal government, as would legitima-
tize its present executive and quasi-judicial operation and thereby save the con-
stitutionality of the proposed copyright revision bill. By opting for a regulatory
agency in the executive branch of government, the Copyright Office also would
become subject to the due process safeguards of the Administrative Procedure Act,
which even the Register of Copyrights admitted in a November 4, 1974 proceeding
on type face designs was not now applicable to the Copyright Office as a legislative
subdepartment.
Finally, removing the Copyright Office from the legislative branch would have
some important in-house benefits. For instance, the Register of Copyrights pres-
ently functions and has expertise totally dissimilar from the Librarian of Congress
under whose supervision and direction she must oi^erate. In addition, the Copy-
right Office cannot be promptly or directly responsive to the needs of its own
personnel and other purely parochial matters if the Librarian's approval is
required on matters relating to hiring, firing, pay scales, relationships with the
rental agent and the like. On the other hand, re-locating the Copyright Office as
an autonomous agency within the executive department, like the Patent Office,
would increase efficiency by removing the bureaucratic layer presently imposed by
the requirement of the Librarian's approval for almost every act and function of
the Copyright Office.
The separation of the Copyright Office from the Library of Congress, moreover,
would not hamper the Librarian's ability to enlarge and enrich his collections from
copyright deposits. It is clear that the Copyright Office does not have to be a sub-
department of the Library of Congress as a condition for copyright deposits to flow
into the Library. Prior to 1870, the very substantial accumulations of copyright
deposits were nonetheless acquired by the Librarian of Congress even though his
department was not responsible for the administration of the copyright laws.
Because of the limits of time, I recognize that my brief statement will provide
only a tip-of-the-iceberg glimpse of the constitutional problems. A more extensive
review is incorporated in a longer study which I am preparing under the title
"The Copyright Office: A Constitutional Confrontation" which is scheduled for
publication in the November, 1975 issue of the George Washington Law Review.
I thank the Committee for allowing me to appear and express these views.
Mr. Brylawski. My formal statement essentially raises three con-
stitutional pitfalls of the copyright revision bill. The first, which is
somewhat a legacy of current copyright administration and practice,
464
is that the execution of the copj^right laws by the Copyright Office, a
-subdepartment of the legislative branch of the Federal Government,
violates the separation of powers doctrine of our Constitution in that
there is no separation thereby provided between the enactment of the
copyright laws and their execution if both functions are performed
within the legislative branch.
Today, the Copyright Office operates substantially under the act of
1909 with few minor amendments. An examination of the pre-1909
proceedings and the 1909 committee report clearly establishes that
our present copyright statute reposes very narrow authority upon the
Eegister of Copyrights, which some have characterized as merely
ministerial to permit tlie Copyright Office to receive and record claims
of copyright. At the annual ABA convention last year, the present
Register of Copyrights, Ms. Barbara Einger, acknowledged the rather
passive nature of her office as being a Registry Office with little more
than two old ladies with a tiling cabinet.
The present bill, H.R. 2223, proposes to vest in the Register broad
•discretionary, administrative, and regulatory powers. In addition,
chapter 8 of the bill establishes new ratemaking and royalty distribu-
tion functions in the Copyright Royalty Tribunal to be created within
the Copyright Office. These functions would resemble the regulatory
activities of certain agencies in the executive department such as the
ICC, FPC, and CAB. Yet, rather limited judicial review is provided
for these new Copyright Office functions.
The net result of the revision bill would be to weld the enactment,
-execution, and judicial review of the proposed copyright law into a
function to be administered almost entirely within the legislative
branch of government, providing no participation by the executive
branch and only a very limited review by the courts. If this combina-
tion of functions is constitutional, then there would be no legal prohi-
bition against Congress transferring from the executive fold all of the
functions of the Patent Office, SEC, ICC, FTC, and virtually any other
■executive or administrative agency of the Federal Establishment.
How this patent violation of the separation of powers doctrine es-
caped the attention of constitutional scholars is puzzling. Perhaps, the
explanation derives from the fact that tlie Copyright Office quite acci-
dentally found its way into the legislative department over 100 j^ears
ago when Librarian Ainsworth Spolford recognized that copyright de-
posits would provide a ready and cheap means for enrichening the col-
lections of the Library of Congress into a great national library and,
hence, persuaded Congress in 1870 to transfer tlie copyright registra-
tion or depository function to the Library of Congress. As long as the
Library of Congress, and afterwards the Copyright Office, performed
only a i-ecordkeeping or depository function j^or copyright deposits, it
behaved in a library-like fashion and did not exercise enough power to
attract attention or raise any constitutional eyebrows. With its evolu-
tion and maturity into a full administrative or regulatory agency,
however, the Copyright Office now seems confronted with the con-
stitutional question whether its adoption by a legislative parent was
legitimate.
The second constitutional reef over which Congress must chart the
• copyright bill is that the ratemaking, if not the royalty distribution,
.function of the Copyright Royalty Tribunal is a legislative function
465
which can only be delegated to an executive agency within clearly de-
fined and rather narrow standards if the copyright revision bill is not
to be an unconstitutional delegation of legislative power. Standards for
such rate.making activities are not clearly established in the bill. More-
over, the Copyright Office, within which the Copyright Royalty Tri-
bunal would operate, is not an executive agency but rather a_ legislative
subdepartment. Since Congress may not delegate^ legislative powers
to one of its own committees, it seems obvious that it may not delegate
such power to a legislative subdepartment, here the Copyright Office,
which is not even a segment of an elective body.
Third, there is a substantial danger that the Copyright Royalty Tri-
bunal might run afoul of tlie due process clause under the fourteenth
amendment. The procedural safeguards of the Administrative Proce-
dure Act would not apply since neither the Copyright Royalty Tri-
bunal, nor the Copyright Office, of which it is a part, would seem to fit
the definition of agency under section 551, title 5, United States Code,
the codified version of the Administrative Procedure Act.
Unfortunately, section SOi of the copyright revision bill, dealing
with the procedures of the Copyright Royalty Tribunal, does not seem
to guarantee the constitutional minimum of a hearing, notice in the
Federal Register, and certain other procedural guarantees. Moreover,
judicial review under section 809 of the revision bill of royalty rate
determinations has been totally ignored and judicial review of royalty
distribution has been limited to matters amounting to fraud and cor-
ruption. All of these elements concerning the procedures of the Tri-
bunal and the judicial review of its decisions raise the question whether
the parties affected by such rate determinations or royalty distribu-
tions would have their day in court.
If the constitutionality of the present bill is to be saved it would seem
necessary to remove the Copyright Office from the Library of Congress
and reestablish it in the executive branch like the Patent Office, its
constitutional sibling. Transplanting the Copyright Office thus into
the executive branch would not only legitimatize the executive and
quasi judicial operations of the Copyright Office under the revision
bill, but would also subject the Copyright Office to the due process safe-
guards of the Administrative Procedure Act, which even the Register
of Copyrights admitted in a November 4, 1974, proceeding on typeface
designs was not now applicable to the Copyright Office as a legislative
subdepartment.
I recognize that my brief statement can only provide a superficial
glimpse of the constitutional problems, but I trust that these remarks
will prove to be constructive, and helpful to the committee.
I am now open to questions if I can elaborate on any of these points.
Thank you very much.
Mr, Kastenmeier. Thank you. Professor Brylawski.
I would like to yield to the gentleman from Illinois, Mr. Railsback.
Mr. Railsback. Yes. What would you do to correct the bill?
Mr. Brylawski. Well, I would provide an enabling provision where-
by the Copyright Office function and the activity delegated to the
Copyright Office would be moved into the executive department, pos-
sibly the Department of the Interior or the Department of Commerce.
Mr. Railsback. You would move the whole Office and aU of iti
functions?
466
Mr. Brylawski. Yes.
Mr. Railsback. What about giving the FCC the power that is en-
visioned, that is given in the bill to the Copyright Royalty Tribunal?
INIr. Brylawski. I think it would have authority over more than
what the FCC does.
Mr. Railsback. No, I mean the fee schedule, setting the fees and
some of the other powers, giving that power to the FCC rather than
to the Register of Copyrights ?
Mr. Brylawski. I think it could be done insofar as the cable TV roy-
alties and rates are concerned, but there are also the royalties and rates
under the section relating to sound recordings and distribution of juke-
box royalties and so forth which would not be matters, I think, nor-
mally within the competence or jurisdiction of the FCC.
Mr. Railsback. Has there ever been a case that you know of where
the authority of the Copyright Office to implement and execute laws
has been challenged ?
Mr. Brylawski. Well, there only have been approximately six re-
ported challenges of copyright administration or the authority of the
Copyright Office to reject registrations since the act in 1909. None of
those cases have raised the constitutional questions which I raise before
the committee today.
jMr. Railsback. Thank you.
Mr. Kastenmeier. The gentleman from California, Mr. Daniel son.
Mr. Danielson. I just want to say thank you. I had not thought
about that constitutional problem at all, for which I can only sit here
and blush and say thank you very much. And I will pass.
]Mr. Kastenmeier. The gentleman from New York, Mr Pattison.
Mr. Pattison. I feel the same way. No questions.
Mr. Danielson, I think you may have a point.
Mr. Kastenmeier. Mr. Pattison ?
Mr. Pattison. No. No questions.
Mr. Kastenmeier. Let me just ask one further question. Quite apart
from the theoretical constitutional question you cite, is there any
practical disability or disadvantage to parties by virtue of the Librar-
ian of the Congress or the Register of Copyrights theoretically being a
part of the legislative branch? After all, they must exercise laws, and
I think the Librarian and the Register are not appointedby the Con-
gress as such. They are appointed, the Librarian is appointed by the
President, and the Register by the Librarian I believe.
]\Tr. Brylawski. That is correct.
Mr. Kastenmeier. Consequently, for all practical purposes, they
are as separate from us as any executive agency. I am talking about
the practical, the practical rather than the theoretical constitutional
question.
Mr. Brylawski. Well, I can think of several things, but I will try
to boil them down to two things in response to your question. I think
that the Copyright Office in recent years hns felt certain constraints.
T am not sure they would rationalize them as constitutional constraints.
Because they are" in the legislative department, they do not liave quite
the formal procedures and hearings of the Patent Office with respect
to the exchange with the copyright applicant and his attorney con-
cerning matters which thev obiect to or afford the basis on which they
refuse' registration. They certainly have attempted to perform fairly,
467
but the procedures have been quite informal, and the adoption of regu-
lations or practices in the form of the Compendium of Copyright Office
Practices has been done somewhat informally without permitting
input by interested parties like in a typical executive agency where
they would put forth a proposed regulation, notice in the Federal Reg-
ister and take testimony and the like.
Xow, Ms. Ringer did follow the course of action of having a formal
hearing and took testimony for the first time last November on the
question of changing the regulations on copyright on original type-
face design, and the response was good, but this is all being done
gratuitously and informally.
The second question is the extent you wish to formalize the pro-
cedures in the Copyright Office, or to encourage the type of examina-
tion in the Copyright Office that you would have in the Patent Office.
You would have to subscribe to a slightly different fee concept, where
at the present time the copyright fee is $6 whether it is a several million
dollar motion picture or a completely, commercially untested musical
composition. The fee structure in the Patent Office starts from $45 and
it goes up, partly to match the fact that the examination there is very
substantial. And I think that the examination of the Copyright Office
is nnicli broader and deeper than it was several years ago, and I think
that it will continue to be.
So we have the philosophical question as to how large a fee we want
to impose upon a claim of copyright on a commercially untested work.
Those are just two of several points which I could raise in response to
your question.
]Mr. Kastenmeier, Well. I appreciate the point you have raised. On
behalf of the committee, Mr. Brylawski, we would like to thank you
for your contribution.
]\ir. Brylawski. My pleasure. Thank you.
Mr. Kastenmeier. Next the Chair would like to call on Prof. Rondo
Camei'on, who. incidentally, is well known to the Chair for his work
at the University of Wisconsin several years ago. Professor Cameron
is an author, scholar, and teacher, and you are most welcome, Mr.
Cameron. You have a short statement, and you may proceed.
TESTIMONY OF PROF. RONDO CAMERON, AUTHOR, SCHOLAR, AND
TEACHER
Mr. Cameron. Mr. Chairman, members of the committee, members
of the staff. I appreciate this opportunity to present my views, those
of an ordinary citizen, on this important legislation. Tt frequently
happens in the legislative process that the voices of ordinary citizens
are drowned by the clamor of special interests, and I include among
those the bureaucracy that we have heard from today. I am glad to
see that such does not appear to be the case with the bill now under
consideration.
Although I qualify myself as an ordinary citizen, my interest in the
outcome of this legislation is far from negligible. IMoreover, as a
teacher, a research scholar, and an author, I am representative of the
many thousands — indeed, millions — of others who pursue those honor-
able professions. For us — teachers, scholars, authors — the printed word
is at the very heart of our professional lives and of our livelihood.
Books, magazines, and scholarly journals are the tools of our trade.
468
Both as producers and users of copyrighted material we are vitally
interested in the protection of the intellectual property of authors and
in its accessibility for fair use by teachers, students, and scholars.
Mr. Chairman, let me note, for the record, that I am the author,
coauthor, or editor of eight books that have appeared in more than 20
different editions; of more than 100 articles, contributions to sym-
posia, columns, and reviews; and that various of my writings have
been translated into virtually all major languages including Japanese,
Korean, and Arabic. I am also the editor of the "Journal of Economic
History," a scholarly publication with an international circulation.
Finally, as president of the Economic History Association, I am the
official representative of its 1,000-odd individual members, and speak
unofficially on behalf of many other similar scholar-teachers.
Mr. Chairman, in view of my background and interests, I will con-
fine my remarks to those portions of the bill concerned with litem i-y
works, as defined in the bill, and more particularly to sections 106-108,
In general, Mr. Chairman, I find the bill to be excellent, at least those
portions with which I am most familiar, a great improvement over tlie
present chaotic state of copyright law. I wish to commend your com-
mittee and its staff, its predecessors in previous Congresses and their
counterparts in the Senate, for striving to bring order out of chaos.
I wish for the bill speedy, if now belated, passage.
In spite of my general commendation and my wishes for speeds
passage, I do have two points of criticism. It seems to me that there
are two flaws in the bill which, however, can be remedied with minimal
changes in the text of the bill. The first concerns the umiecessarily
vague language in sections 107 and 108. The second concerns an omis-
sion from the bill of serious concern to authors of textbooks especially.
I will take them up in that order.
One. One of the most widespread abuses of the rights of authors
at the present time results from the technological progress that h;is
made possible cheap, rapid reproduction of published works by photo-
copying and similar processes. As a researcher and teacher, I have
found these devices most useful and convenient; but as an author. I
have suffered from the unwarranted and unfair — and unremune rated —
copying of my books and articles. It is one thing to photocopy a few
isolated pages in preference to laboriously copying by hand or type-
writer a series of passages needed for later reference; it is quite another
to photocopy entire chapters, articles, and even books for sale or other
forms of distribution.
Although sections 107 and 108 take a step in the right direction by
identifying and attempting to cope with this abuse, they are not,
in my opinion, sufficiently specific and precise. I believe the bill should
set specific limits on the amount and number of copies that can be
made of a copyrighted publication, beyond which the user or duplicator
should pay a royalty to the author and publisher. I will be glad to
indicate what I think those limits should be if the committee wishe-^;.
As the analysis of the Seuate bill 1?>61 of the 9od Congress states
succinctly — Calendar No, 946. page 118 : "Isolated instances of minor
infringements, when multiplied many times, become in the aggregate
a major inroad on copyright that must be prevented." In my opinion
the best way to prevent it is not to forbid it legally, which would only
result in surreptitious infrinp-ements, but to require the beneficiaries
to pay a royalty to the owner of the copyright.
469
Two. There is no provision at all in the bill for the payment of
royalties on the resale of published books and similar works. I am not
concerned here with the market for old, rare, and out-of-print books,
many of which are no longer under copyright in any case, or with tlie
casual, informal markets that exist, for example, among college stu-
dents for the resale of textbooks among friends and classmates. What
is of concern, however, is the numerous large, organized markets for
the commercial resale of used or "secondhand" books, especially text-
books.
The existence of these markets constitute a serious threat, in the lan-
guage of section 107, to "the potential market for or value of the copy-
righted work." As above, I do not suggest that such commercial resale
should be prohibited, merely that the wholesalers or retailers should be
required to pay a royalty to the owner of the copyright. Musical com-
posers, artists, moviemakers, and such receive royalties on commercial
"performances and displays" of their works; it is only fair that au-
tliors should receive royalties for the commercial resale of theirs.
Subject to these two qualifications, Mr. Chairman, which I hope the
committee will remedy in its final markup of the bill, I again con-
gratulate you on your fine work in revising the copyright law. Thank
you for your attention.
Mr. Kastenmeier. Thank you. Professor Cameron.
In the second suggestion you make, I am rather interested because I
do not recall that the publishers or others who ought to be interested
in this question have raised it. Now, perhaps they have, but I do not
i-ecall that they have, so we will have to ask them. They would have a
financial interest in this.
]Mr. Cameron. Certainly, ]Mr. Chairman. And that point was
l^rought to my attention in my conversations with my publishers. It is
estimated, for example, on a normal commercially successful textbook,
in the second year after it is published about one-third of the copies
used are secondhand copies, and in the third and subsequent years as
much as 50 percent and more of the copies are secondhand copies.
Mr. Kastenmeier. On the first point, j^ou invite us to ask you what
the limits might be on the amount and number of copies that can be
made by duplication. I will invite you to suggest, partly because it will,
I tliink, give us an indication of how you conceive of the problem.
The types of materials and the types of matter differ so greatly that I
am wondering whether they are all susceptible to the same rule. In
any event, what limits do you think might be placed on copies ?
Mr. Caivieron. A reasonable rule, Mr. Chairman, would follow the
guidelines that photocopying should be, without payment of royalties,
should be restricted to the kinds of copying that a scholar, for example,
would do by hand, or on a typewriter. And this suggests, or translates
more specifically in that photocopying of single copies of isolated
pages might proceed without payment of royalty, but the photo-
copying of multiple copies of one or more pages, or the photocopying
of a single copy of an entire item, such as a chapter in a book, or an ar-
ticle in a journal, should be made subject to royalty payments.
Mr. Kastenmeier. In other words, one could not then make two
copies of a single page without payment of royalty ?
]Mr. Cameron. It seems to me, Mr. Chairman, that that may be a
minor point ; but, yes. I would say the legislation which would restrict
470
photocopying without payment of royalty to a single copy of an iso-
lated page.
Mr. Kastenmeier. Thank you. The gentleman from California,
Mr. Danielson.
Mr. Danielson. Suppose that single copy is made today and tomor-
row somebody else comes back to make a single copy, would you change
the rule at that point ?
Mr, Cameron. This is a matter of grave concern in the case of library
copying. I do not know how it could be dealt with except that if it were
discovered that a conspiracy were underfoot, then I su]3pose it could
be dealt with.
Mr. Danielson. I do not know how many conspiracies you may have
investigated, or if you have any concept of the amount of time and
money involved in a conspiracy, but anyway, it is an interesting'
thought.
On your secondhand book subject, what a copyright owner is en-
titled to under the Constitution is the protection of the use of his liter-
ary property so that it will stimulate his activities in producing some
more. Suppose instead of selling the book 1 student bought a book and
10 students in a little group were allowed to read the same book. Now,
you have 10 pairs of eyes rather than 1 pair of eyes on this book. What
would you suggest about that ?
Mr. Cameron. That happens regularly, all of the time, Mr. Daniel-
son. I do not think anything could be done about it. I am not greatly
concerned about the voluntary and the spontaneous activities of
students to avoid payment for books. What I am concerned about is
the commercial exploitation of the desire of students to reduce their
payment to the owners of the copyrighted material.
iSIr. Danielson. Well, your suggestion is interesting. But, in the real
world that we live in, I want to suggest to you, you do not count on my
vote.
That is all, Mr. Chairman.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
Mr. Pattison. I was just going to comment on, I gTiess, the same
thing, the problem of the resale of old books. It seems to me as far as
textbooks are concerned, it is usually resolved by the author coming
out with a new edition about once a month.
•; Mr. Cameron. It does not work quite that way.
^ Mr. Pattison. No; I understand. But I think it would be a very
"difficult problem to regulate and resolve.
In the area of the number of copies, what you have suggested is. I
think, under anybody's definition within, I do not think any librarian
would have any problem determining that that was fair use to the limit
you suggested, so making it specific would not really add very much. I
think the problem comes about when you are talking about specialized
journals that even a very limited kind of use, where you are talking
about making three or four copies, it is going to have a very big effect
on that particular journal ; whereas in Time magazine or something
like that. Time magazine really does not care whether you made all
of the copies you wanted. It is cheap, and it is out of date v/ithin a
week's time, and they are not concerned. So, the nature of the journal
is really what determines how many copies will constitute fair use. And
I would suggest that any kind, any number of copy limitation just
simply would not accomplish very much.
471
Mr. Cameron. I do not follow your reasoning on that, Mr. Pattison.
Mr. Pattison. Well, a scientific journal, for instance, which has a
very limited subscription, any kind of copying at all of that
Mr. Cameron. Precisely.
Mr. Pattison. Almost exceeds fair use.
Mr. Cameron, That is why I say that there should be specific limits.
Mr. Pattison. Well, it seems to me from the standpoint of the librar-
ian and the other part of it, which is the teacher's part, that if the
teacher wants to take an article out of Time magazine and make 10
copies for his class of one particular page of Time magazine, that prob-
ably also would be fair use, even though it would not be fair use in the
technical journal. And we have to look at both sides of that picture.
We have the teacher's side, as you quite well expressed.
Mr. Cameron. Yes.
Mr. Pattison. And the other side, which is the author's side. The
author in the case of Time magazine probably would be perfectly wil-
ling to admit that 10 copies of 1 page would be fair use, whereas the
author of the scientific journal may well not.
Mr. Cameron. But
Mr. Pattison. So if we put an artificial limitation on the number of
copies
Mr. Cameron. As the bill is now written, there is no protection ex-
cept through tedious and extensive judicial process for the author of
the article in the scientific journal.
Mr. Pattison. On the other side, there is no protection for the
teacher who wants to get that information out, and would presumably
get quick permission from certain kinds of authors and journals who
are delighted to have you copy all you want. But the practical matter
of getting permission
Mr. Cameron. Telephone call.
Mr. Pattison. Well, a telephone call from Dubuque, Iowa, to Time
magazine for a sixth grade teacher who wants to do something tomor-
row is kind of ridiculous. I mean, it just does not work out, and the
teacher ends up having to subject himself to that terrible penalty
that we have added to the bill if he does not make a telephone call, and
even if he did make the telephone call he is not even sure who he is talk-
ing to.
Mr. Cameron. What he does now is what he would continue to do,
I hope, after the bill is passed, which is to go ahead and make the
copies,
Mr. Pattison. But the problem — that is the problem, I think, de-
signing a bill that we know is going to be violated, and I am not sure
that that is the right way to legislate. I have no further questions,
Mr- Kastenmeier. The gentleman from Illinois, Mr. Kailsback.
Mr. Railsback. Professor, in respect to resale, I am inclined to think
that under the law, the general law of contracts, unless the seller puts
some kind of a restriction or a reservation on the sale, that that person,
that business can do with that property whatever any owner wants to
do with it. It is like you buy a piece of art work or a painting, or a
patented machine, you buy it without any restriction, and you can sell
it, you can give it away, you can do whatever you want to do. That is
frankly my initial impression,
Mr. Kastenmeier. Would the gentleman yield ?
Mr. Railsback. Yes.
472
]Mr. Kastenmeier. Yes. Actually this brought my attention to section
109 (a) which says, "Notwithstanding the provisions of section 106 (5) ,
the owner of a particular copy or phonorecord lawfully made under
this title," the copy being a copy of a book or anything else, I gather,
"or any person authorized by him is entitled, without the authority of
the copyright owner, to sell or otherwise dispose of the possession of
that copy or phonorecord," meaning such person is entitled to resale
without royalty. So the bill, in fact, comes down in opposition to your
suggestion. Your suggestion would be to remove that?
5lr. Cameron. Yes.
Mr. Kailsback. But I mean, even in the absence of that, it is my be-
lief that you become a proprietor, just like you buy a book, you become
the owner of it, or you buy a i^ainting, you buy a piece of patented
machinery, you buy a design, you can either give it away, you can sell
it, you are the owner of it, and that is what you are paying for. Except
if the owner wants to attach a condition to his contract of sale ; in other
words, what you are talking about is contract, you offer me a book, I
buy your book, and unless there is a condition, unless you attach a
condition, I can do with it anything I want to do. And that is just
the law of contracts.
Mr. Cameron. That is correct, Mr, Railsback. But I am suggesting
that in this case it should be changed in order to provide for fairness to
the authors of the copyrighted material.
Mr. Railsback. I think that you would have to change it in so many
other areas, to be fair about it — well, let me just pursue something else.
How do you feel about having a central intermediary as far as to
obtain price quotes on published works? In other words, one of the
problems that editors have, I think, or students, is that they have a
work, they perhaps should pay for reproducing it, I think, I agree,
and what I am saying is I agree with you that there are instances where
they should be paying, but I imagine in some cases it is very difficult
to get price quotes. What do you think about having some kind of a
central intermediary or central office to get hold of the author to, you
know, get a price ?
Mr. Cameron. In general, Mr. Railsback, I am against multiplying
the bureaucracy. I would not like to see that.
Mr. Railsback. How would you deal with the problem of relative
inaccessil)ility then? In other words, where it is difficult to get hold
of somebody ?
Mr. Cameron. I do not think that is a problem, and as I
Mr. Railsback. Well, you know why it is not a problem ? Because
they do not do it now. They just go ahead and reproduce it. In other
words, the law is not in force.
Mr. Cameron. Well, as I pointed out in my statement, I am not con-
cerned with the isolated, casual exchanges of isolated copies of books,
but I am concerned about the commercial resale of hundreds of copies
of textbooks.
I would like to bring to your attention and that of the entire com-
mittee that in Great Britain and several other European countries there
are now proposals, which will almost certainly be enacted into law, to
pay authors royalties on library use ; that is to say, libraries will keep
records of how many times a book is checked out, and authors will be
paid royalties according to that. And I think that is also, although I
473
have not gone that far in my recommendations to the committee, it
certainly is in the same direction as my proposal for royalties on
resales.
Mr. Railsback. That is all I have. Thank you.
Mr. Danielson. I have one observation I must make or I will have
indigestion all day, Mr. Chairman. I want you to understand one thing,
Professor, that under the Constitution the only purpose of copyright
is to promote the progress of science and useful arts. That is all. There
is nothing else. But for that, you would have nothing on copyright.
Now, the disease which makes second-rate nations of some of the
countries of Europe need not be adopted to all'ect our own structure,
and while I am here, it is not going to be. I recommend, sir, with all
respect to your intellectual achievements, that you join the real world.
This proposal of yours has no cliance whatever of success.
Mr. Cameron. Mr. Danielson, you tend to confirm my opinion of the
majority of Congressmen. Thank you.
Mr. Danielson. That is very well. I am delighted.
Mr. Kastenmeier. Thank you, Professor Cameron.
[The prepared statement of Rondo Cameron follows :]
Statement of Professor Rondo Cameron
Mr. Chairman, INIembers of the Committee, IMembers of the Staff : I appre-
ciate this opportunity to present my views, those of an ordinary citizen, on
this important legislation. It frequently happens in the legislative process that the
voices of ordinary citizens are drowned by the clamor of special interests. I am
glad to see that such does not appear to be the case with the bill now under
consideration.
Although I qualify myself as an ordinary citizen, my interest in the outcome of
this legislation is far from negligible. Moreover, as a teacher, a research scholar,
and an author, I am representative of the many thousands — indeed, millions —
of others who pursue those honorable professions. For us — teachers, scholars,
authors — the printed word is at the very heart of our professional lives and of
our livelihood. Books, magazines, and scholarly journals are the tools of our
trade. Both as producers and users of copyrighted material we are vitally in-
terested in the protection of the intellectual property of authors and in its
accessibility for fair u,se by teachers, students, and scholars.
Mr. Chairman, let me note, for the record, that I am the author, co-author,
or editor of eight l)Ooks that have appeared in more than twenty different edi-
tions ; of more than 100 articles, contributions to symposia, columns, and re-
views ; and that various of my writings have been translated into virtually all
major languages including Japanese, Korean, and Arabic. I am also the editor
of the Journal of Economic History, a scholarly publication with an interna-
tional circulation. Finally, as president of the Economic History Association,
I am the official representative of its thousand-odd individual members, and
speak unofficially on behalf of many other similar scholar-teachers.
Mr. Chairman, in view of my background and interests, I will confine my re-
marks to those portions of the bill concerned with literary works, as defined in
the bill, and more particularly to Sections 106-108. In general, Mr. Chairman, I
find the bill to be excellent (at least those poi-tions with which I am most fa-
miliar), a great improvement over the pi'esent chaotic state of copyright law. I
wish to commend your committee and its staff, its predecessors in previous Con-
gresses, and their counterparts in the Senate, for striving to bring order out of
chaos. I wish for the bill speedy if now belated passage.
In spite of my general commendation and my wishes for speedy passage,
I do have two points of criticism. It seems to me that there are two flaws in the
bill which, however, can be remedied with minimal changes in the text of the bill.
The first concerns the unnecessarily vague language in Sections 107 and 108. The
second concerns an omission from the bill of .serious concern to authors of text-
books. I will take them up in that order.
(1) One of the most widespread abuses of the rights of authors at the present
time results from the technological progress that has made possible cheap, rapid
57-786 O - 86 - pt. 1 - 31
474
reproduction of published works by photocopying and similar processes. As a
researcher and teacher, I have found these devices most useful and convenient ;
but as an author I Iiave suffered from the unwarranted and unfair (and unre-
munerated) copying of my books and articles. It is one thing to photocopy a few
isolated pages in preference to laboriously copying by hand or typewiiter a series
of passages needed for later reference ; it is quite another to photocopy entire
chapters, articles, and even books for sale or other forms of distribution. Although
Sections 107 and 108 take a step in the right direction by identifying and attempt-
ing to cope with this abuse, they are not in my opinion sufficiently specific and
precise. I believe the bill should set specific limits on the amount and number of
copies that can be made of a copyrighted publication, beyond which the user or
duplicator should pay a royalty to the author and publisher. I will be glad to
indicate what I think those limits should be if the committee wishes. As the
analysis of the Senate bill 1361 of the 93rd Congress states succinctly (Calendar
No. 946, p. 118) :
"Isolated instances of minor infringements, when multiplied many times,
become in the aggregate a major inroad on copyright that must be prevented."
In my opinion the best way to prevent it is not to forbid it legally, which would
only result in surreptitious infringements, but to require the beneficiaries to
pay a royalty to the owner of the copyright.
(2) There is no provision at all in the bill for the payment of royalties on the
resale of published books and similar works. I am not concerned here with the
market for old, rare, and out-of-print books, many of which are no longer under
copyright in any case, or with the casual, informal markets that exist, for
example, among college students for the resale of textbooks among friends and
classmates. What is of concern, however, is the numerous large, organized
markets for the coommercial resale of used or "second hand" books, especially
textbooks. The existence of these markets constitute a serious threat, in the
language of Section 107, to "the potential market for or value of the copyrighted
work." As above, I do not suggest that such commercial resale should be pro-
hibited, merely that the wholesalers or retailers should be required to pay a
royalty to the owner of the copyright. Musical composers, artists, moviemakers
and such receive royalties on commercial "performances and displays" of their
works ; it is only fair that authors should receive royalties for the commercial
resale of theirs.
Subject to these two qualifications, Mr. Chairman, which I hope the com-
mitee will remedy in its final mark-up of the bill, I again congratulate you on
your fine work in revising the copyright law. Thank you for your attention.
Mr. Kastenmeier. The Chair would now like to call on Mr. Donald
D. Merry, president of Sicom Electronics Corp.
Mr. Merry, you are welcome.
TESTIMONY OF DONALD D. MERRY, PRESIDENT, SICOM
ELECTRONICS CORP.
Mr. Merry. Thank you, Mr. Chairman. I realize that you are run-
ning short of time, so I will try to accelerate.
Gentlemen, please accept my sincere appreciation for this opportu-
nity to speak to you today on H.R. 2223 and copyright matters in
general.
My presentation will take approximately 14 minutes and has been
arranged to minimize the confusion from discussing specific subjects
lifted out of context.
Congressional sclieme in copyriglits : It has always been a character-
istic of our social and governmental attitude to find tlie concept of a
monopoly reprehensible. In the building of this Republic, Congress has
acted, in accordance with the Constitution, to develop a body of laws
which have as a primary goal the benefit of society at large. Sometimes,
to accomplish that goal, it was and is necessary for Congress to embrace
rather than oppose the concept of a monopoly. So it is in matters of
475
patents and copyrights which are, in themselves, monopolies. Congress
has, and I think rightly so, "dangled a carrot,'' called a copyright, in
front of those creative individuals among us to stimulate them into
producing, through their unique talents, works which will benefit
society at large. The "carrot" or monopoly or copyright is only
granted for a limited time and with the understanding that uj)on ter-
mination of the monopoly all rights inure to the public domain.
Ralph Waldo Emerson wrote, "The man who grasps principles can
successfully select his own methods. The man who tries methods,
ignoring principles, is sure to have trouble."
In the matter of copyrights, the underlying principle is the benefit
of society at large. The method is to reward the creator. It follows
that, in any legislation centering on copyrights, the primary interests
of society are at least as important as the methocls and secondary
benefactors involved.
The music industry has prospered and grown dynamically since
19l20. There is an accompanying chart to show that. This has only been
possible because of a sound miderlying body of laws. Title 17 has
served society well since 1909.
As we meet during these sessions to consider changing and revising
the present copyright statutes, we should be cautioned by Emerson's
wisdom and not "get the methods ahead of the principle" or we are
sure to have trouble. There has been, during the past 10 years, a great
deal of emotion and activity at the Federal and State legislative level
and also in the Federal and State courts related to control efforts in
the copyright area. Indeed, most of these efforts resulted in various
authorities, both Federal and State, imposing some form of control
over matters of a copyright nature when the authority to do such was
vested only in Congress. We all know the familiar saying about "too
many cooks spoiling the soup."
In line Avith that, there is presently sweeping across our country a
trend that will, if allowed to mature, reverse the primary and second-
ary ^oals of the intent of oui" present congressional coi^yright scheme,
leavmg the interests of society neglected. My purpose here today is to
pixjvide what hopefully w^ill be constructive comments to assure society
is not neglected and Ave continue to enjoy sound growth in our industry
based on fair, equitable laws.
Comments on H.R. 2223 : Addressing ourselves now to specific points
in H.R. 2223, 1 offer the following comments.
Under section 115, at page 21, line 21: "A person may not obtain
a compulsory license for use of the work in the duplication of a sound
recording made by another.'' I suggest you add "without the approval
of tlie OAvner of the master sound recording." Many of the sound
recording masters in use today are licensed out to businesses who
manufacture and distribute under the compulsory license proAasions.
Present Avording of section 115 could be construed so as to render
legally useless large libraries of music properly assembled for this
purpose.
Presently, section 115 effect iA^ely requires the use of musicians to
qualify for a compulsory license and ignores the fact that there are
lousinesses Avhich specialize in recording — studios — and there are
businesses which manufacture and distribute. Of course, there are
also the major music companies Avho are Avealthy enough to do both.
476
Section 115, as it stands, would eliminate that segment of the music
industry — small business — which cannot justify or afford an expensive
recording studio. It preempts the present pooling of such cost by small
business and would result in lost royalties to the copyright holder.
It favors big business.
Section 115, paragraph (a), clause (2), should be reviewed care-
fully to assure it does not stifle creativity. Many innovations, such as
the electronic moog, might be cramped by the wording of this clause.
Under section 115, paragraph (c), clause (1) at line 21: It is sug-
gested that, due to problems frequently experienced today, a more spe-
cific location for the identification of a copyright holder be set forth.
"The registration or other public records of the Copyright Office"
is, I contend, too vague to be workable as experience has proved. This
is an excellent time to solve this age-old problem by simply nailing
down a specific location where anybody can obtain this information
readily. By location, I mean a specific file in the Library of Congress.
Under section 115, paragraph (c) , clause (3) at line 35 : The require-
ment for a CPA to certify with a detailed statement of account, the
monthly royalty reports, each month, is unworkable in practice and is
a severe and unnecessary burden on small businesses. It will not hurt
big business. Annual certified statements following monthly state-
ments, attested to by company officers, should be adequate.
Under section 115, some provisions should be provided to clarify
situations which arise when the copyright holder refuses to acknowl-
edge the rights of a compulsory license applicant. Experience has
shown that this is not an isolated problem. The statutes are generally
written with the protection of the copyright holder in mind; however,
where we have a compulsory contract between two parties by statute,
we must be sure to offer consideration to both.
Under section 301, more detail should be set forth defining the legal
status of property rights which are vested in the public. Such prop-
erty, presently in the public domain, is being denied the public use
through various interpretations of the many courts across our great
land. The confusion exists at all court levels, both Federal and State
and even manifests itself in a five-to-four Supreme Court decision.
While section 301 is supposed to preempt those laws in the nature of
copyrights, such intent is circumvented by simply calling it another
name; that is, unfair competition. In one c^se a court ruled that a
plaintiff had no statutory property right and the plaintiff had no
common law property right but the plaintiff did have a "quasi prop-
erty right" in a musical sound recording. How in the world can a
businessman foresee a court creating a whole new thing not provided
by statute? Much of the public's time and money can be spared by
eliminating expensive litigation in our courts through clarifying de-
finition now.
Under section 302, an objection must be made to the copyright term
of life plus 50 years. First of all, this has been pi-oposed more as an
attempt to standardize with what is the custom in certain European
countries and the wording of the Geneva Convention. In Europe, they
don't feel as we do about monopolies and cartels. Our Government,
the people, feel differently and I see no reason to offer more stimulus
to the creative individuals in our society than is required to keep
society enriched with a free flow of ideas and useful arts. Certainly no
477
one can say the present incentive of 28 years plus 28 years has resulted
in lack of growth. Why then increase the cost to society? It is ab-
solutely not necessary. Remember, the primary goal of the copyright
laws is to benefit society. This philosophy also extends to the idea of
extending present copyrights beyond their legal limit. How can that
possibly give a just return to society for granting a monopoly —
copyright ?
Additionally, now that sound recordings are entitled to copyright
protection, a problem arises where the creator is granted a copyright
for life plus 50 years. ]\Iost sound recordings are created by a cor-
poration whose life — specified in the articles of incorporation — is per-
petuity. So we have perpetuity plus 50 years which is forever and that
conflicts with the Constitution Avhich requires that such monopolies
be "for limited times."
Regarding section 705, some consideration should be given to pro-
viding additional data to the public by the Library of Congress. If, in
fact, the primary purpose of the copyright scheme is to benefit the
public then an effort should be made to make it easy for the public
to avail themselves of that which is theirs. To accomplish this is rela-
tively simple. In addition to the aforementioned file reflecting the
copyright holder, the date and renewal date of the copyright should
be shown. A separate file containing works on which the copyrights
have expired should be provided so it may be used by the society which
paid for it with a limited monopoly.
Concluding remarks: The preceding comments have been offered
to help bridge the gap between the businessplace and the legislative
offices of you gentlemen. Throughout this presentation you un-
doubtedly noted that an emphasis was placed on society's welfare. I
felt this was necessary. During the past 10 years, the hotly contested
battles which have taken place in our courtrooms on such subjects as
cable TV, pirating sound recordings, and copying of literary works,
and othere, have resulted in so much case law that is at odds with
statutory law.
Federal judges disagreeing with other Federal judges. Companies
fighting tooth and nail in ugly displays of greed, power, and corrup-
tion. Not once in some 100-plus court cases reviewed by this person
involving copyright mattere did the interests of society emerge.
Always it is some special interest faction attempting to cement a
position of advantage over others. JVIore often than not, those of us
whose lives are involved with copyrights are easily caught up in the
complex and emotional issues at hand and it is very difficult to keep
one's head screwed on correctly — to view the issues from their proper
perspective.
I suggest to you, gentlemen, that our own lifeblood, the society
in which we live, has not received a proper share of her just earnings
and consideration. Please contemplate this as you consider some of the
suggestions which I have brought to you today.
Thank you.
]Mr. Kastexmeier. Thank you, INIr. Merry. I think you kept well
within your allotted time of i4 minutes, and I do not think you took
that much time.
I would like to yield to the gentleman from Illinois, Mr. Railsback.
478
Mr. Railsback. I have no questions, but I want to thank you for
your testimony.
Mr. Merry. Thank you, sir.
Mr. Kastexmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson. Same thing. I have no questions. I wish to thank
you. In fact, I have nothing here that I can quarrel with.
Mr. Merry. Thank you, sir.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
Mr. Pattison. I am interested in the fact that you do not specify
what problems arise from section 115(a) as it relates to something
like the moog.
Mr. Merry. No, I do not. My feeling in that particular section, sir,
was that as several other of the persons ahead of me have testified, the
teclinological advances have required a revision of this law. And there
was a time prior to Public Law 92-140 when Congress did not see,
for instance, that sound recordings were entitled to coypriglit. They
were not creative in nature. They now see fit to award them copyrights.
The same is true of arrangements that are now creative in nature
that were not before. The electronic moog is the example that I use, but
it is possible for someone to be creative in a sense today that they never
recognized in years past. For instance, creative dancing is something
that lately, and I suspect in the 1920's it probably would have been
scandalous, but today it is recognized as an art form.
Mr. Pattison. I am just curious how it would affect, how paragraph
145 — I am not just maybe as familiar with that as you are. How would
that impact on something like the moog ?
Mr. Merry. The moog is a musical instrument that electronically
creates musical sounds and simulates other instruments.
Mr. Pattison. Every band has a moog these days.
Mr. Merry. You indicated in here that an arrangement shall not
change the basic melody and fundamental character of the work and
shall not be subject to a protection as a derivative work under this
without the consent of the copyright owner, and then I think when an
author, and I will use a musical work as an example, when the author
gets a copyright, which is generally identified in sheet music form,
it is possible for another creative artist like Burt Bacharach or some-
one to come along and redo that work and change the fundamental
character of not necessarily the — well, let's take some of the more con-
temporary presentations, and the one that comes to mind is Jesus
Christ Supei-star. That is an interpretation that involves many adapta-
tions to the original work, and so do others.
Mr. Pattison. About which there has been brought out a lot of
litigation on that particular one.
Mr. Merry. Right. Yes. There probably has been.
Mr. Pattison. There is a performing group and the authors have
differed by exactly what you are pointing out.
Mr. Merry. Yes.
Mr. Pattison. They have said that the performance was a separate
thing.
Mr. IVIerry. I see. The effort here, of course, is to protect the prop-
erty owner.
Mr. Pattison. No, it is both.
Mr. Merry. I think that if we accepted the concept of compilation
copyrights and derivative works, then we have to not restrain the
479
people who would deriv^e another work through a compilation and deny
him a chance to express himself in his medium. I think it is something
that has to be looked into. I think it might be something that just
has not been viewed from all the vantage points that it should.
Mr. Paitisox. U h liuh.
Mr. ]VIerry. It is not anything that I cannot personally live with.
I am just looking at it from the benefit of creative people in the society
at large.
Mr. Pattison. Well, I thank you for your comments, and they
are extremely helpful.
Mr. Kastenmeier. I would only, in conclusion, want to say that when
you were talking about a corporation, and you suggest that this would
provide for a co2:>yright for life plus 50, or for perpetuity plus 50, that
is not the case. That would be a work for hire, and the term is a term
of 75 years from tlie date of first publication. It is a fixed term. It
does not endure during the life of a corporation.
Mr. Merry. All right, Mr. Chairman, I understand what you are
saying, but I offer this explanation. You have to differentiate between
the components of the musical work, and there are basically five of
them. There is the music, the words, the arrangement, the plastic disc,
being the record itself, and then the artist's rendition, say Johnny
Cash singing it. Now, in the case of the music, and the song, and the
arrangement, that is granted a copyright for life plus 50 years, but
not if this is, let us say, Columbia Records who comes along and
utilizing that copyright under contract creates a sound recording, and
they get a copyright on that sound recording, the corporation itself
has created the sound recording, and they are entitled to copyright for
life plus 50 years.
Mr. Kastenmeier. They would be entitled insofar as they created
it as a corporate interest and held a copyright.
Mr. :Merry. Yes.
Mr. Kastenmeier. They would be entitled to 75 years after
publication?
Mr. Merry. Only 75 years? Okay. That was not clear to me. Thank
you.
Mr. Kastenmeier. But nonetheless, your points, otherwise, I think,
are well made, and we appreciate your contribution this morning.
Mr. Merry. Thank you very much.
[The prepared statement of Donald D. Merry follows :]
Statement of Donald D. Merry, President, Sicom Electronics Corp.
Gentlemen, please accept my sincere appreciation for this opportunity to speak
to you today on H.R. 2223 and copyright matters in general.
My presentation will take approximately 14 minutes and has been arranged
to minimize the confusion from discussing specific subjects lifted out of context.
congressional scheme in CX)PYRIGHTS
It has always been a characteristic of our social and governmental attitude to
find the concept of a monopoly reprehensible. In the building of this Republic,
Congress has acted, in accordance with the Constitution, to develop a body of
laws which have as a primary goal the benefit of society at large. Sometimes, to
accomplisli tliat goal, it was and is necessary for Congress to embrace rather
than oppose the concept of a monopoly. So it is in matters of patents and copy-
rights which are, in themselves, monopolies. Congress has, and I think rightly
so, "dangled a carrot", called a copyright, in front of those creative individuals
among us to stimulate them into producing, through their unique talents, works
480
which will benefit society at large. The "carrot" or monopoly or copyright is only
granted for a limited time and with the understanding that upon termination of
the monopoly all rights inure to the Public Domain.
Ralph Waldo Emerson wrote, "The man who grasps principles can successfully
select his own methods. The man who tries methods, ignoring principles, is sure
to have trouble."
In the matter of copyrights, the underlying Principle is the benefit of society
at large. The Method is to reward the creator. It follows that in any legislation
centering on copyrights, the Primary interests of society are at least as impor-
tant as the Methods and Secondary benefactors involved.
The music industry has prospered and grown dynamically since 1920 (see
accompanying chart). This has only been possible because of a sound underlying
body of laws. Title 17 has served society well since 1909.
As we meet during these sessions to consider changing and revising the present
copyright statutes, we should be cautioned by Emerson's wisdom and not "get
the methods ahead of the principle" or we are sure to have trouble. There has
been, during the past 10 years, a great deal of emotion and activity at the
Federal and State legislative level and also in the Federal and State courts
related to control efforts in the copyright area. Indeed, most of these efforts re-
sulted in various authorities, both Federal and State, imposing some form of
control over matters of a copyright nature when the authority to do such was
vested only in Congress. We all know the familiar saying about "too mamy cooks
spoiling the soup".
There is presently sweeping across our country a trend that will, if allowed to
mature, reverse the primary and secondary goals of the intent of our present
Congressional copyright scheme, leaving the interests of society neglected. My
purpose here today is to provide, what hopefully will be, constructive comments
to assure Society is not neglected and we continue to enjoy sound growth in our
industry based on fair, equitable laws.
COMMENTS ON H.R. 222.'5
Addressing ourselves now to specific points in H.R. 2223, I offer the following
comments.
Under section 115, at page 21, line 21 — "A person may not obtain a compulsory
license for use of the work in the duplication of a sound recording made by
another." I suggest you add "without the approval of the owner of the master
sound recording". Many of the sound recording masters in use today are licensed
out to businesses who manufacture and distribute under the compulsory license
provisions. Present wording of section 115 could be construed so as to render
legally useless large libraries of music properly assembled for this purpose.
Presently section 115 requires the use of musicians to qualify for a compulsory
license and ignores the fact that there are businesses which specialize in record-
ing (studios), and there are businesses which manufacture and distribute. There
are also the major music companies who are wealthy enough to do both. Section
115 as it stands would eliminate that segment of the music industry (small
business) which cannot justify or afford an expensive recording studio. It
pre-empts the present pooling of such cost by small business and would result
in lost royalties to the copyright holder. It favors big business.
Section 115, paragraph (a), clause (2) should be reviewed carefully to assure
it does not stifle creativity. Many innovations such as the moog might be cramped
by the wording of this clause.
Under Section 115, paragraph (c), clause (1), at line 21— It is suggested that,
due to problems frequently experienced today, a more specific location for the
identification of a copyright holder be set forth. . . . "the registration or other
public records of the copyright ofiice" is too vague to be workable as experience
has proved. This is an excellent time to solve this age old problem by simply
nailing down a specific location where anybody can obtain this information
readily. By location, I mean a specific file in the Library of Congress.
Under Section 115, paragraph (c), clause (3), at line 35— The retiuirement for
a CPA to certify with a detailed statement of account, the monthly royalty re-
ports, each month, is unworkable in practice and it is a severe and unnecessary
burden on small businesses. It will not hurt big business. Annual Certified state-
ments following monthly statements attested to by company officers should be
adequate.
Under Section 115, some provisions should be provided to clarify situations
which arise when the copyright holder refuses to acknowledge the' rights of a
481
compulsory license applicant. Experience has shown that this is not an isolated
problem. The statutes are generallj^ written with the protection of the copyright
holder in mind; however, where we have a compulsory contract between two
parties by statute, we must be sure to offer consideration to both.
Under Section 301, more detail should be set forth defining the legal status
of property rights which are vested in the public. Such property, presently in
the public domain, is being denied the public use through various interpretations
of the many courts across our great land. The confusion exists at all court levels,
both Federal and State and even manifests itself in a 5 to 4 Supreme Court deci-
sion. While section 301 is supposed to preempt those laws in the nature of copy-
rights, such intent is circumvented by simply calling it another name ; i.e., unfair
competition. In one case a court ruled that a plaintifC had no statutory property
right and the plaintiff had no common law property right but the plaintitt did
have a "Quasi property right" in a musical sound recording. How in the world
can a businessman foresee a court creating a whole new "thing" not provided
by statute ! Much of the public's time and money can be spared by eliminating
expensive litigation in our courts through clarifying definition now.
Under Section 302, an objection must be made to the copyright term of life
plus 50 years. First of all, this has been proposed more as an attempt to
standardize with what is the custom in certain European countries and the
wording of the Geneva Convention. In Europe, they don't feel as we do about
monopolies and cartels. Our government, the people, feel differently and I see
no reason to offer more stimulus to the creative individuals in our society than
is required to keep society enriched with a free flow of ideas and useful arts.
Certainly no one can say the present incentive of 28 years plus 28 years has
resulted in lack of growth. Why then increase the cost to society ? It is absolutely
not necessary. Remember, the primary goal of the copyright laws is to benefit
society. This philosophy also extends to the idea of extending present copyrights
beyond their legal limit. How can that possibility give a just return to Society
for granting monopoly (copyright)?
Additionally, now that sound recordings are entitled to copyright protection,
a problem arises where the creator is granted a copyright for life plus 50 years.
Most sound recordings are "created" by a cori)oration whose life (specified in the
articles of incorporation) is perpetuity. So we have perjietuity plus 50 years
which is forever and that confiicts with the Constitution which requires that such
monopolies be "for limited times."
Regarding Section 705, some consideration should be given to providing addi-
tional data to the public by the Library of Congress. If, in fact, the primary
purpose of the copyright scheme is to benefit the public then an effort should be
made to make it easy for tlie public to avail themselves of that whicli is theirs.
To accomplish this is relatively simple. In addition to the aforementioned file
reflecting the copyright holder, the date and renewal date of the copyright should
be shown. A separate file containing works on which tlie copyrights have expired
should be provided so it may be used by the society which paid for it mth a
limited monopoly.
CONCLUDING REMARKS
The preceding comments have been offered to help bridge the gap between the
business place and the legislative ofi^ces of you. gentlemen. Throughout this
presentation you undoubtedly noted that an emphasis was placed on society's
welfare. I felt this was necessary. During the past ten years, the hotly contested
battles which have taken place in our courtrooms on such subjects as cable T.V.,
pirating sound recordings and copying of literary works and others have resulted
in so much case law that is at odds with statutory law. Federal judges disagreeing
with other Federal judges. Companies fighting tooth and nail in ugly displays
of greed, power and corruption. Not once in some 100 plus court cases reviewed
by this person involving copyright matters did the interests of society emerge.
Always it is some special interest faction attempting to cement a position of
advantage over others. More often than not. those of us whose lives are involved
with copyrights are easily caught up in the complex and emotional issues at
hand and it is very difficult to keep one's head screwed on correctly — To view
the issues from their proper perspective.
I suggest to you, gentlemen, that our own life blood, the society in which we
live, has not received a proper share of her just earnings and consideration.
Please contemplate this as you consider some of the suggestions which I have
brought to you today.
482
U.S. RECORD/TAPE SALES 1921-1972
(Dollars) 1400
J
1300
J
1200
^
f
1
1
\j
J
J
./
/
1
f
r"
/
t
1^
J
1
1
J
1
1
0 .
_^—
""^ 1 — '
_/
75
Records
Pre-Recorded Tape* .
U.S.
(Source: Record Industry
SALESIN YEARLY
MILLIONS PERCENT
YEAR OF DOLLARS CHANGE
1921 $106 - %
1922 92 -13.2%
1923 79 -14 1%
1924 68 -13,9%
1925 59 -132%
1926 70 + 18 6%
1927 70 NC
1928 73 + 4.3%
1929 75 + 2.7%
1930 46 -38 7%
1931 18 -60.9%
1932 11 -38 9%
1933 6 -45.5%
1934 7 + 16 7%
1935 9 + 28 6%
1936 11 +22 2%
1937 13 + 18.2%
'^Page 1
RECORD SALES 1921
Association of America Excise tax payments
SALESIN YEARLY
MILLIONS PERCENT
YEAR OF DOLLARS CHANGE
1938 26 +100%
1939 44 +69.2%
1940 48 + 9.1%
1941 51 + 6.3%
1942 55 + 7.8%
1943 66 + 20%
1944 66 N.C.
1945 109 +652%
1946 218 +100%
1947 224 + 2.8%
1948 189 -15.6%
1949 173 - 8.5%
1950 189 + 9 2%
1951 199 + 5.3%
1952 214 + 7 5%
1953 219 + 2.3%
1954 213 - 2.7%
-1972
estimates (rom ollner data )
SALESIN YEARLY
MILLIONS PERCENT
YEAR OF DOLLARS CHANGE
1955 277 + 30 0%
1956 377 + 36.1%
1957 460 + 22.0%
1958 511 + 111%
1959 603 + 18.0%
1960 600 - 0.5%
1961 640 + 6.7%
1962 687 + 7.3%
1963 698 + 1.6%
1964 758 + 8.6%
1965 862 + 13.7%
1966 959 + 113%
1967 1051 + 9 6%
1968 1124 + 6.9%
1969 1170 + 4 1%
1970 1182 + 1.0%
1971 1251 + 5,8%
1972 1383 + 10.6%
VlUbovrd Mli-MIA Inlgrnjltonil Mutlc-RecOfd Otftclory
Mr. Kastenmeier. This concludes this morning's hearing on copy-
rights. The subcommittee, upon adjournment, will meet on Wednesday
next for a continuation of our hearings on copyrights. Until such time,
we stand adjourned.
LWliereupon, at 12 :25 p.m., the hearing was recessed to reconvene
on Wednesday, June 11, 1975, at 10 a.m.]
COPYRIGHT LAW REVISION
WEDNESDAY, JUNE 11, 1975
House of Representatives,
Subcommittee on Courts, Civil Liberties,
AND THE Administration of Justice
OF THE Committee on the Judiciary,
Washington^ D.C.
The subcommittee met, pursuant to notice, at 10 :10 a.m., in room
2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier
[chairman of the subcommittee] presiding.
Present : Representatives Kastenmeier, Danielson, Drinan, Badillo,
Pattison, Railsback, and Wiggins.
Also present : Herbert Fuchs, counsel ; and Thomas E. Mooney, asso-
ciate counsel.
Mr. Kastenmeier. The committee will come to order.
We are convened this morning for another hearing in the series
of hearings on the proposed revision of the Copyright Law. This morn-
ing will be completely devoted to witnesses representing cable tele-
vision, in one respect or another. We have six witnesses representing
varying viewpoints on the question of how this proposal will affect
cable television in this country.
The House will be in session earlier than normal. We will try to
move as quickly as we can, but with due respect to the witnesses, we
will try to complete our business, so we will be able to attend the
regular session.
I am very pleased this morning to greet as our first witness the
chairman of the National Cable Television Association, Rex A.
Bradley. Mr. Bradley, will you come forward, please?
You might also like to identify your colleagues. The Chair observes
that you have a rather substantial statement and addendum of mate-
rial submitted to the committee, which, will, without objection, be
accepted for the record. You may proceed, sir.
TESTIMONY OF REX A. BRADLEY, CHAIRMAN, NATIONAL CABLE
TELEVISION ASSOCIATION
Mr. Bradley. Mr. Chairman, I have a shorter version of my testi-
mony, from which, in the interest of time, I will be speaking. If mem-
bers of the committee would like to have copies, we have them
available.
With me at the table on my right is Mr. Bruce Lovett, who is the
immediate past chairman of NCTA ; I relieved him a couple of months
ago. He is also vice president for industry affairs of ATC, one of the
Xation's larger cable companies.
(483)
484
To my left is Mr. Stuart Feldstein, who is the vice president for
legal and government relations for NCTA. And at the end of the table
is Mr. Don Andersson, who is the vice president for statistical services
of NCTA.
As you have indicated, my name is Rex Bradley, and I am chair-
man of the National Cable Television Association, and I am also
president of TeleCable Corp. of Norfolk, Virginia, which is the owner
and operator of 15 cable systems serving 130,000 subscribers in 10
States. Today I am speaking in my capacity as chairman of NCTA.
The National Cable Television Association is the major trade asso-
ciation representing the cable television industry. Our membership
includes both multiple system operators and independent cable tele-
vision operators. NCTA's 1,320 member systems currently serve 5.8
million subscribers, or 58 percent of the Nation's 10 million cable tele-
vision households. We recognize that copyright was conceived in the
public's interest, to assure that creative minds would be encouraged
by compensation to produce and distribute the fruits of that creativ-
ity. Later in my statement I will discuss further our view of copyright
and comment specifically on H.R. 2223.
Since time is limited, I will summarize my longer statement. The
longer statement, submitted for the record, contains a comprehensive
review of cable's early development, the FCC's gradual assumption of
jurisdiction over cable, and the early pattern of broadcaster opposition
to cable growth.
Additionally, it takes note of the important legal decisions on copy-
right, resulting in two Supreme Court decisions holding cable not lia-
ble for copyright under the 1909 law, attempts of various parties to
negotiate a settlement, and the very close relationship between FCC
regulatory actions and the copyright question.
I believe it is important for the Congress to understand this back-
ground to current copyright consideration. It demonstrates the com-
plexity of the cable/copyright problem, the intense pressures and
uncertainties created for the cable industry and the almost inextricable
interrelationship between copyright and cable regulation.
During these hearings, I am sure you will hear charges — principally
from broadcasting and motion picture representatives — to the effect
that the cable television industry has not lived up to its copyright
responsibilities, that cable is an unfair competitor, and that the
industry has attempted to delay resolution of the copyright issue.
I can only assure you that throughout this frustrating period NCTA
has attempted in every way possible to live up to its fundamental
commitment to work for fair copyright legislation.
As a member of this committee you are no doubt aware that there
are divisions within the cable industry over the issue of copyright
payments. There are those who feel that there should be no copyright
liability at all. Others believe that there should be no liability for
signals received off-the-air, while others suggest no liability for a
complement of signals that can reasonably be defined as adequate
service. I believe, however, that the majority of the members of NCTA
support the association's efforts to w^ork with Congress in arriving
at fair and reasonable legislation.
Before addressing myself to specific provisions in H.R. 2223, I
would like to emphasize several key factors which I believe this com-
485
mittee and the Congress must consider in arriving at fair copyright
legislation.
The Constitution and the courts have recognized that copyright
protection has a twofold purpose, to encourage creativity and equally
as important, to promote the dissemination of knowledge to the public.
Cable television, through its reception and distribution of television
broadcast signals, promotes the dissemination of laiowledge to the
public. Indeed, without this service, significant numbers of Americans
would be denied the fruits of creative labor. Congress should be cog-
nizant of this vital CATV role. Legislation which, for whatever rea-
son, restricts or decreases the dissemination of knowledge to the cable
television public would not be consonant with the primary public
interest concern of copyright.
Second, the Congress should be aware that imposition of copyright
liability will have an impact on the CATV subscribing public. To a
significant extent, the cost of copyright liability will be borne by cable
subscribers.
Let me make several further observations on the current financial
state of the industry. It has taken several years, but an awareness is
growing that CATV is not the pot of gold it was once thought to be.
Last year, for example, nine of the top publicly held companies —
companies who will bear a very sizeable percentage of the copyright
burden — suffered a combined net loss of nearly $17 million on total
revenues of $267 million.
CATV is a capital intensive business. It is also a business whose
expenses, for the most part, are fixed, subject to very little influence of
the CATV manager. Cable systems experience a number of substantial
expenses, whose levels are established arbitrarily by some authority,
not subject to the moderation of competitive pressures. Some of these
expenses are subject to change, with little opportunity of the CATV
operator to influence the level. Examples of these are pole rents, micro-
wave charges, interest, franchise taxes, property taxes, and FCC fees.
Because most cable expenses are fixed, the only opportunity for
cable operators to obtain and maintain a favorable profit margin is
through additional subscribers, or by increasing subscriber rates —
often difficult because city councils' approval must be obtained.
The uncertainties related to these uncontrollable expenses make fi-
nancial planning and borrowing difficult and expensive.
Let me now turn to the specific provisions of H.R. 2223. Chapter 8
of the bill would create for the first time a Copyright Royalty Tribunal
in the Library of Congress. This tribunal would be composed of three
persons and would be empowered by statute to adjust copyright
royalty rates, the revenue base, and in certain circumstances, the dis-
tribution of royalty fees. The tribunal is directed to undertalve a
review of royalty rates within 6 months of the date of enactment of
the law, and that review is to be completed within 18 months. Thence-
forth, the tribunal would conduct a review every 5 years ad infinitum.
Mr. Chairman, we are opposed to the establishment of a tribunal
with the uncertainty which is inherent in the tribunal's power, and
we further believe that chapter 8 of this bill is laced with infirmities
that represent a very serious threat to the future viability of the cable
television industry. This tribunal carries with it the potential for sub-
stantial escalation of copyright fees in a very short period of time.
486
The Office of Telecommimications Policy has ah^eady pointed out the
damaging effect this uncertainty and lack of stability can have. You
will hear further about the impact of uncertainty on cable's growth
by a representative of the financial conununity following my presen-
tation.
I do not think that I exaggerate when I say that virtually any sig-
nificant copyright payment by this industry represents a financial
burden. An unknown periodic review as mandated in this bill presents,
in my opinion, not potential, but actual grave economic problems to
a growing industry. You are aware of the difficulties that all high-risk
businesses are now facing in obtaining short-term financing. I do not
wish to plead economic hardship to this subcommittee, but plead I
must. We in the industiy know too well the economic realities and the
potential grave effects of further uncertainty on the capital market.
Further, chapter 8 contains no criteria to guide tribunal review of
rates; it contains no provision for judicial review of the tribunaPs
decision other than for fraud, and in our opinion, it provides for no
effective congressional review. In short, we find this section of the bill
fraught with uncertainty, an uncertainty that this industry can ill
afford.
I would like to suggest a more reasonable approach to the issue of
insuring fair rates in the future. Such an approach is already con-
tained in the bill. Section 111(d) provides for the establishment of a
compulsoi-y license for secondary transmissions by cable systems. Roy-
alty fees are computed on the basis of escalating percentages of gross
receipts from subscriber revenues. We believe that this progressive
fee schedule, based on percentages, represents an eminently logical and
reasonable approach. It substitutes marketplace economics for arbi-
trary decisions. It has the logic of a graduated income tax without
the loopholes. It provides for the interests of the copyright owners,
since their revenues from cable will increase as the cable system
revenues increase. Such an approach takes both the industry's growth
and inflation into account. If cable television is to grow and prosper,
so will the ow^ners of copyrighted product share in that growth and
prosperity.
In summary, then, we strongly urge this subcommittee to retain the
approach of the bill's progressive fee schedule based on a percentage
of revenues, and discard the uncertainty that is inherent in the power
of the tribunal to change these percentages. Such an approach avoids
the need to establisli yet another bureaucratic procedure and substi-
tutes a logical and simple approach for an arbitraiy and complicated
one.
Section 501 of H.R. 2223 deals with infringement of copyright. Sub-
section (b) thereof entitles the copyright owner to initiate action for
infringement. We have no objection to that provision. However, sub-
section (c) grants a television broadcast station rights as legal or
beneficial owner of a copyright for purposes of instituting action for
infringement. We very strongly object to this provision.
As you know, the rights to most television programs are held, not
by the broadcaster, but by the copyright owner. In those cases, where
the television station does hold the copyright, he is fully protected
against infringement under subsection (b). However, subsection (c)
would grant to hundreds of broadcasters the right to institute harass-
487
ing suits against cable operators for very minor or even inadvertent
violations of FCC regulations. Such a provision is. we think, an aberra-
tion, unprecedented in copyright law. It should be stricken from the
bill. Adequate remedies for violations of FCC regulations already are
available under the Communications Act.
iMr, Chairman, in earlier testimony before this subcommittee Deputy
Assistant Attorney General Irwin Goldbloom, of the Justice Depart-
ment, urged that CATV systems not be required to pay copyright on
local signals carried. He further stated that by carrying local signials,
the cable system enhances the broadcaster's market, and that the copy-
right holder is lieliDed, not hurt, by cable system carriage. NCTA fully
supix)rts this line of thinking. We note also that Thomas Keller, Act-
ing General Counsel for OTP, stated to the subcommittee last week
that local signals should not be liable for copyright.
While Mr. Goldbloom did not suggest to this subcommittee a method
or mechanism for imposing liability only on signals outside the area
of free use, the logic of his recommendation is undeniably sound.
NCTA has addressed internally this question in great detail. We have
researched and studied a variety of possible approaches to the Justice
Department's concept of an area of free use.
We have, however, determined that it is apparently impossible to
arrive at a fee formula embodying this concept applied on a system-
by-system basis, wdiich does not discriminate unfairly against one
portion of the cable television industi-y, and consequently against the
public receiving service from such systems.
We believe that the concept advanced by the Justice Department
can and should be embraced in the following manner. Copyright lia-
liility for CATV distribution of broadcast signals should be imposed
without respect to signals carried. Thei-e appears to be no fair way to
impose liability for carriage of certain signals and not others.
By retaining the present fee schedule in H.R. 2223 and exempting
from liability the first $25,000 in gross quarterly subscriber receipts
for all cable television systems, copyright legislation can give some
recognition to that portion of cable service which fills gaps, or im-
proves reception in the service areas of broadcast stations.
Such an exemption involves a reasonably small dollar amount in
relationship to the total copyright revenues to be derived from cable
now and in the future. It also has the benefit of providing substantial
relief to the smaller, traditional community antenna systems. The
owners of copyrighted product themselves have frequently stated that
they are not primarily concerned w4th this type of cable system. In-
deed, the 1971 consensus agreement envisioned a total exemption from
liability for all cable systems serving fewer than 3,500 subscribers.
The blanket exemption we propose would have the practical effect of
exempting nearly all systems with fewer than 1,500 subscribers. We
believe this kind of exemption to be an equitable and fair approach
to the problem of copyright liability for local signals. We submit for
your serious consideration an amendment to achieve this.
Mr. Chairman, I will now turn to the third matter NCTA would
like to comment on. Earlier in my testimony I have alluded to the
FCC's cable television regulations and to the close historical inter-
relationship between copyright and regulation as applied to cable.
For your convenience, the most pertinent of those regulations are in-
488
eluded in my text, but, in the interest of time I will skip over those
and not read them.
It has been remarked, and I think not too facetiously, that while
the Congress has been laboring to develop copyright provisions ap-
plicable to cable, the FCC has for some time now been guarding the
copyright gate by promulgating copyright regulations of its own.
Earlier this year, in an address to the NCTA convention, Barbara
Ringer, Register of Copyrights, stated that the FCC rules "contained
the most elaborate copyright provisions I have ever seen anywhere."
She continued :
I don't know much about communications law, but I know copyright law when
I see it, and the exclusivity provisions of the FCC regulations are copyright
regulations ; in effect, the enactment of a copyright law through the regulatory
process. And they are unquestionably the most complex and difficult to under-
stand of anything I've ever read in this field.
Absent legislation, or specific congressional direction, and in spite
of Supreme Court decisions, the Federal Communications Commission
has consistently invoked copyright principles to protect broadcasting
from competition. The pervasive nature of the Conunission's forays in
a variety of regidatory matters into "exclusivity" of all tyj)es is in
and of itself a subject for broad independent investigation.
For the purpose of these hearings, however, one thing ought to be
indisputably clear. While the FCC's 1972 iiiles have granted cable
systems the right to carry a limited number of broadcast signals, that
right — and the value and marketability of those signals for cable
operators — has in very large part been negated by the Commission's
syndicated and network program exclusivity provisions. Stated in the
simplest of terms, a cable operator has the right to carry signals, but
has an obligation to black out most of the programing on those signals.
And this is achieved through the Commission's "copyright regula-
tions."
For example, the cable system under construction in Wauwatosa,
Wis., must under the FCC's syndicated exclusivity regulation delete
62 percent of the programing on one cliannel it imports, and 58 per-
cent on the other channel. What, the operator can fairly ask, is the
value of cariying the signal ? Appendix C of my testimony contains
a more detailed explanation of this problem.
It ought to be beyond any logical dispute that if cable systems are
to incur liability for the distribution of these signals, then they should
have the riglit to show what has been paid for. Yet, if copyright legis-
lation of H.R. 2223 were enacted today, that would not be the case.
We believe it is imperative that the Congress should insure that cable
operators get what they pay for. This should be done in this legisla-
tion, and we are submitting language to accomplish this aim.
I would like to invite the subcommittee's attention to several addi-
tional recommendations for perfecting changes in section 111 of the
bill.
Section 111(b) of H.R. 2223 appears to make the secondary trans-
mission of over-the-air pay-television signals an act of infringement,
and one subject to civil and criminal penalties. Tliis subcommittee
should be aware that Federal Communications Commission regula-
tions require CATV systems to carry the signals of all television broad-
cast stations in specified geograpliical areas, regardless of whether
489
those signals are originated by commercial broadcast stations or STV
stations. Therefore, under section 111(b) the cable system would be
faced with either violating FCC rules and regulations, or the copy-
right law.
Next, section 111(a) (4) exempts government-owned and non-profit
translatoi-s from the requirement to pay fees. As a matter of law, we
believe tliat no rational distinction can be made between CATV sys-
tems whose purpose is to improve reception of television signals, and
translators which serve the same purpose. Additionally, of course,
H.R. 2223 does not exempt nonprofit and government-owned CATV
systems. Should not such translators be placed on an even competitive
footing with commercial translatoi's and cable systems?
Third, section 111 (a) (3) , as currently drafted, raises the possibility
that cable operators pi-oviding leased channels to the public or others
could incur copyright liability for the material programed on those
channels by the lessees. Federal Communications Commission regu-
lations require that certain cable systems make available channels for
lease on a nondiscriminatory basis and that the cable operator may
exercise no control over the program content on those channels. We
respectfully suggest that the language of section 111 (a) (3) be changed
to insure that the cable operator does not incur copyright liability on
leased channels. The lessee, of course, would remain liable for the pay-
ment of copyright.
Finally, portions of section 111 and the language of section 801(a)
raise the possibility that copyriglit fees in the future could be based
on cable revenues from sources other tlian basic CATV distribution of
broadcast signals.
I believe it is not the intent of Congress to impose copyright liabil-
ity on cable operations beyond the basic reception service, and indeed
there would be no logic to such an approach. The liability contem-
plated in this legislation has no relationship to revenues derived fi-om
local origination, pay cable operations, or any other such service
initiated by a cable operator.
We are submitting suggested clarifying language to deal with these
four matters.
In conclusion I would like to say, Mr. Chairman, NCTA has for 8
years now worked hard under very trying circumstances to assist in
achieving fair and reasonable copyright legislation for CATV. We will
continue those efforts, and we stand ready to assist tliis subcommittee
in every way possible. We are handing you copies of the amendments I
have mentioned, and I will be very happy to respond to questions.
Mr. Kastexmeier. Thank you, Mr. Bradley. One point you men-
tioned, the "Consensus Agreement of 1971."
Mr. Bradley. Yes, sir.
Mr. Kastexmeier. Is that agreement, as far as you know, or as far
as you are concerned, is that agreement still in effect ?
Mr. Bradley. It's in effect to the extent that its effect has not been
denied by actions of the Senate in developing their version of the
copyriglit bill ; and certain actions of the FCC, and certain actions of
certain broadcasters. Some of the provisions of the Consensus Agree-
ment have been overlooked, or have been ignored. So, it is, in effect, a
general type of agreement with some violations.
57-786 O - 76 - pt.l - 32
490
Mr. Kastenmeier. Was that agreement set down in writing, and
does it appear in a public document, incorporated in the Senate hear-
ings ? I don't happen to know that.
Mr. Bradley. I don't know whether it's incorporated in the Senate
hearings. It has been published in the Television Digest.
Mr. IvASTENMEiER. Was this an agreement of parties, was it verbal,
or was it subscribed to ?
Mr. Bradley. It was written.
Mr. Kastenmeier. It's written down, set down in writing?
Mr. Bradley. Yes, sir.
Mr. Kastenmeier. Mr. Bradley, do you happen to have a copy of
that?
Mr. Bradley. Yes, sir; I have a published copy, it appeared in a
magazine.
Mr. I^stenmeier. Would you make that available to the committee ?
Mr. Bradley. Yes, sir.
Mr. Kastenmeier. In referring to the tribunal, you indicate that —
referring to section 501 — you indicate that broadcaster would have
other remedies, adequate remedies, you state, for violations of FCC
regulations are already available under the Communications Act.
Wliat remedies do you have reference to, in comiection with broad-
casters pursuing their rights against cable television operators ?
Mr. Bradley. Well, there are two aspects of this, Mr. Chairman.
Where the broadcaster owns the copyright, he has the same remedy
that any copyright owner has.
And with reference to the FCC regulations, where the broadcaster
alleges that a cable system has violated the regulations, he can file a
complaint with the FCC, who will then take appropriate action.
Mr. Kastenmeier. Under the bill that the Senate passed, and given
the economics of your industry, say, for calendar year 1974, if that is
possible, what do you assume the cost would be under the formula of
the Senate bill to at least your member/subscribers as opposed to
others?
Mr. Bradley. The cost to the industiy in total would be, in our
estimation, $6,700,000.
Mr. Ivastenmeier. That is the entire industry.
Mr. Bradley. Yes, sir.
Mr. Kastenmeier. And that is obviously an estimate, $6.6, or $6.7
million ?
Mr. Bradley. $6.7 million. And to the membere of our association it
would be slightly over $4 million.
Mr. Kastenmeier. Thank you, Mr. Bradley. I yield to my colleague
from California, Mr. Wiggins.
Mr. Wiggins. Mr. Bradley, do you accept, or reject the proposition
that cable should pay a royalty fee to the holder of the copyright for
the transmission of copyrighted material ?
Mr. Bradley. We are willing, Mr. Wiggins, to pay copyright, as I
have indicated, to a pool which would distribute the proceeds to the
copyright owners.
Mr. Wiggins. Having accepted in principle the payment of a copy-
right royalty, what is the justification foi- exempting from that pay-
ment those cable systems with gross revenues of less than $25,000?
491
Mr. Bradley. The point there, sir, is that within our industiy, as I
have mentioned, there is a wide divergence of opinion on property.
There are many members of our association, and numy members of the
industry who are not members of our association wlio are violently
opposed to any copyright payment. There has been testimony, as I
mentioned, to the eli'ect that various people fe^l that there certainly
should be no payment for local stations which can be received locally
over the air.
Our suggestion is simply an effort to exclude those small systems
which would encounter an unusual financial burden as a result of copy-
right payments; and pass a token recognition of the fact that there
should be no payment for the local signals. And while you can't re-
late the dollars to the value of local signals, at least it is an effort to
recognize that.
Mr. Wiggins. What part of the cable industry — if your answer can
reflect it in percentage — would be exempt by the $25,000 gross receipt
exemption ?
Mr. Bradley. Slightly over 50 percent would be exempt.
Mr. Wiggins. Now, in that connection, I think it's well that we keep
in mind that the royalty fee schedule is not a tax, which might be sub-
ject to policy reasons for granting preferred tax rates to socially or
economically deprived units in furtherance of a governmental policy.
Rather, this is a statutory payment to the owner of the pix^perty.
The bill before us proposes a fee schedule commencing at one-half
of 1 percent of the gross revenues up to $40,000, and graduated up to
2^2 percent. As you have indicated in your testimony, and as we all
know, this represents about a 50-percent reduction from that originally
considered by the Senate.
Can you enlighten me and the membere of the committee what con-
siderations entered into that judgment by the Senate, why was that
reduced ?
Mr. Bradley. There was a study prepared by someone named
Mitchell, to the Senate, which indicated the economic impact of these
dollars on the cable industry. I, to some degree, am speculating for a
moment, since I was not there personally. But, in discussions which
related to this point, there is this continual recognition that we should
not be paying for local signals that are receivable over the air.
And that in paying this schedule we are paying an amount sub-
stantially in excess of the fee schedule for these signals that we might
be legitimately required to pay for, if you exclude the local ones. If
you accept that point, which we do, any payment is substantially
higher than the numbers would indicate because we are paying for, in
effect, all service.
Mr. Wiggins. Well, would it be fair for me to conclude that the
Senate listened to your argimient that local signals should not be
subject to royalty payments, and perhaps your argument that all
signals should be exempt, and simply made an accommodation to these
arguments by reducing by 50 percent the fee schedule proposed in the
original House bill and thus reached a compromise ?
Mr. Bradley. Perhaps so, I really don't know. I do know that in our
experience it would be extremely difficult to relate a dollar amount to
be paid to a value to be established in any scientific fashion for the
492
signals, or the contents of the signals which are being carried. I think
the decision, admittedly without total scientific foundation, was
arrived at from the basis of representations by various persons, that
the industry could presumably pay this amount and that the copyright
owners would be adequately compensated in receiving this amount of
money.
Mr. Wiggins. I have been told that primary transmitters who have
customarily paid copyright royalties, compute that royalty payment
as a cost of doing business, and that the cost as a percent of total cost
is considerably higher than the percentage figure here for cable.
Numbers as high as 75 percent and more have been represented to me as
being equivalent to the cost of doing business by primary transmitters
of copyrighted material.
You may disagree with those numbers, but do you disagree with the
proposition that the percentages stated in this bill are significantly
less than those paid by primary transmitters of copyrighted material ?
Mr. Bradley. I'm not familar with it, sir. But, accepting your
statement, I presume that they are less in absolute value. However,
the primary transmitter has the opportunity to sell advertising, which
increases his revenue, which in turn gives the copyright owner a chance
to get higher dollar returns for the value of his copyrighted material.
We don't have that opportunity, we don't sell advertising. While we
do collect from the customers, it is a relatively inflexible type of
revenue.
Mr. Wiggins. Then that is your justification for paying a lesser
return, because you are denied revenue opportunity for sale of
advertising.
Mr. Bradley. Sir, as I mentioned before, and you will hear addi-
tional testimony from others who follow me, I am sure, to the effect
that we should not be paying any copyright ; and in paying on this
schedule we are paying as much as we can be reasonably expected to
pay ; and in particular, in view of the fact that I know of no way of
scientifically developing what the value should be. It is a political,
arbitrary decision that must be made, and it seems to us to be totally
adequate.
Mr. Wiggins. I understand your point.
Now, I want to move on to the tribunal. Your testimony indicated
opposition to the periodic review by the tribunal because it would be
an unstabling factor in the financing of cable operations.
There are a great many corporate, regulated entities in this country
which are subject to review by rate-making authorities. Is there any
difference, conceptually, between a tribunal subjecting your royalty
payments to review, and therefore your revenue to some uncertainty,
and the review that a utility, for example, is exposed to?
Mr. Bradley. I believe there is. It seems to me that in the case of
a utility the reviewing authority will establish the rate, is controlling
the amount of revenue which can be received by that utility.
In the case of the tribunal, the tribunal would have the authority
to decide how much of our existing revenue could be taken away from
us and given to someone else, and without any type of limit, and in our
opinion without any demonstrable basis for establishing this. And the
financial community, and the investment community, looking at the
prospect of a totally unknown possible deduction from our revenue
493
hanging over our head, are going to be extremely reluctant to invest.
We have, to some degree, some of that now.
As you no doubt know, certain of our expenses that we have had
are historically uncontrollable; and the uncertainty of this one is of
greater magnitude,
Mr, Wiggins, One final question, Mr. Chairman, then I will yield
back the balance of my time,
I would think that if your industry was subjected to the royalty
schedule, it would attempt to pass through those added costs to your
subscribers. Is there any reason that you would be unable to do that ?
Mr, Bradley. It would be difficult in many instances. We, in order
to get rate increases, generally must appear before a city council in an
effort to justify our rate. And though we have great respect for city
councils, very frequently they are not sopliisticated analysts that are
encountered nationally, and the local pressures and politics are brought
to bear on them and cause us to frequently get substantially less than
we feel we need ; and sometimes nothing.
Mr. Wiggins. Are they currently unsympathetic to your rising costs,
ac<;ounts, and all the other cost factore that go into provision of the
cable ?
Mr, Bradley, It varies from place to place, yes, sir. In my personal
experience, my company has recently made a presentation — we are in
the process of doing it now — with all of the figures that I think almost
any sophisticated accountant could accept, which justifies a rate in-
crease of $1,25 over what we are now getting. We are probably going
to end up with 75 cents because they feel we shouldn't increase the
rate to their fellow citizens. We have been through this, as have other
companies, many times,
Mr. Wiggins, Thank you, Mr. Chairman,
Mr. Kastenmeier. The gentleman from California, Mr, Danielson.
Mr. Danielson. Thank you, Mr. Chairman.
On the matter of the tribunal, let me ask you this, it may not be
realistic, but the tribunal could lower the fees, as well as raise them.
Would you comment on that, please?
Mr. Bradley. Yes, sir. While it is theoretically possible that the
tribunal might lower the fees, the risk in the eyes of the investment
community, and the financial community is still there, that they are
likely to raise tlie rates in an undeterminable amount. And realistically,
in view of our experiences, and the experiences generally encountered
in the country, we think the chances are much greater that they will
go up, than down.
Mr, Danielson, Well, I think that is the realistic view of the situa-
tion, although it could happen, I suppose, the other way.
How about the prospect of a periodic review by the "tribunal, say,
every 5 years? There are changes in costs, in the marketplace, and
the value of the dollar. Will you comment on whether or not it would
be proper for the tribunal to have this power ?
Mr, Bradley, Yes, sir. With the statement I just made, the uncer-
tainty of the tribunal's action, the financial community is still going
to be reluctant to consider investment, or to consider investment at
lower costs, which we desperately need.
Second, the escalating fee schedule that is contained in the bill,
and the fact that the percentages apply to the gross revenues will tend
494
to compensate for inflationary effects in the presumption that the
cable system will grow, both by the addition of subscribers, and by
increasing rates which will reflect costs.
Mr. Danielson. You mentioned earlier increasing of rates. A while
ago in response to Mr. Wiggin's question you expressed insecurity as to
whether your local franchising agency, usually a city council, would
recognize your added costs.
Is it not the general pattern in your industry that wherever you
operate, the company operates under a franchise from some govern-
mental agency or another?
Mr. Bradley. Yes, sir.
Mr. Danielson. And are the rates charged to your subscribers fixed
by that franchising agency ?
Mr. Bradley. At the present time they are not all fixed, some of them
are, and some of them are not. But, under the new rules of the FCC,
the 1972 rules, the franchising agency will fix and approve the rate.
Mr. Danielson. You are also required, aren't you, to carry all TV
signals within at least the primary transmission area ?
Mr. Bradley. Yes, sir.
Mr. Danielson. How far out does that extend, just the primary
transmission area?
Mr. Bradley. In the top 100 markets it is 35 miles; in the other mar-
kets the distance varies with what is called the grade B contour of the
broadcast station, which generally is roughly 70, 75 miles.
Mr. Danielson. You are getting out beyond the primary transmis-
sion area, at least in the grade B ; ai-e you not ?
Mr. Bradley. I believe, sir, that the definition of the FCC of "pri-
mary transmission area" separates into the two categories, the top 100
markets, and the other markets. Though, it is certainly true that we
are getting out a farther distance.
Mr. Danielson. And you are required to carry those signals.
Mr. Bradley. Yes.
Mr. Danielson. You made reference to the fact that small operators
who are within the primary transmission area, I think that you are
using the terms not necessarily synonymously, but they tend to be the
same, have such few subscribers, and obviously a lesser growth revenue
that you feel they should be exempted.
I think that is on the theory that they are operating in the primary
transmission area ; am I right in that ?
Mr. Bradley. For the most part, yes, sir.
Mr. Danielson. How about the other part, is the state of the art such
that a small operator could have a distribution system located a num-
ber of miles away, quite a number of miles away, and receive his input
either by microwave, or a lease line of some kind ?
Mr. Bradley. Yes, sir; that is technically feasible. However, the eco-
nomics of the situation are such that miless he has a pretty large
universal subscriber, he can't afford to pay microw^ave charges, or in-
vest in microwave service.
Mr. Danielson. How big a system would you need to break through
this economic barrier?
Mr. Bradley. I don't know that I can answer precisely, but there
are some small systems in the western part of the country where there
is virtually no television reception, where microwave service is used,
495
and the rate charged the subscriber is much higher than in other parts
of the country.
So, while I haven't seen the figures, they are, presumably, econom-
ically viable. They must be, they are still in business.
Mr. Danielson. Are there any in the eastern parts of the United
States, say, east of the Mississippi ?
Mr. Bradley. Small systems using microwave?
Mr. Daxielsox. Yes, or leased cable, other means to bring it in,
other than picking it out of the air.
Mr. Bradley. Yes, sir; I am sure there are some. I believe there are
some in the State of Peiuisylvania, and there are probably others.
Mr. Danielson. Well, that brings you into a situation where those
people would be competing, probably, with a local transmission, or
could be.
Mr. Bradi^y. You mean competing signals ?
Mr. Danielson. Yes.
Mr. Bradley. Imported in this fashion ?
Mr. Danielson. Yes.
Mr. Bradley. They are competing in a sense, perhaps, in those in-
stances they are usually — or are sometimes, at least^ — importing the
signal that is not available locally. They are filling out a network serv-
ice, or an independent.
Mr. Danielson. What I am thinking of, see, unfortunately we are
dealing with copyright here
Mr. Bradley. Yes, sir.
Mr. Danielson [continuing]. And I think there is tremendous con-
fusion. FCC is trying to regulate using copyright, and we are trying
to regulate it ; it's kind of mixed up.
But, if you have an overlap, and you are bringing in outside signals
into an area served by a regular TV station, conceivably you are bring-
ing in signals which compete for viewer interest with another signal
generated locally.
Mr. Bradley. Yes, sir.
Mr. Danielson. And the copyright value to the owner of the copy-
right could be diminished. Would you comment on that, please?
Mr. Bradley. Well, I'll try; it is a complicated picture, obviously.
There are owners of the copyright of the programs distributed by the
local station ; and there are owners of the copyright of the programs
which are imported. And, certainly, there is some likelihood that there
will be some reduction in the viewership of the local signals if the
transmitted imported signal is more attractive to that viewer.
So, on the one hand, I suppose, it's fair to say that the owner of the
copyright of the local signals might suffer, and the other one might
benefit.
Mr. Danielson. You certainly gave us a truism that this is a com-
plicated problem. I would like a helpful suggestion. I don't mean you
are not being helpful, but if you have a constructive suggestion on how
to solve this, I would invite it.
Mr. Kastenmeier. The Chair will interrupt for the purpose of ob-
serving for the subcommittee that there is an on-going quorum call to
Avhich members may desire to respond. However, the committee will
continue through this or any other quorum call. But, in the event of a
vote we will recess.
496
And I want to observe that Mr. Bradley is the first of six witnesses.
We have already 'been in session for about an hour.
Mr. Danielson. If you would give me a comment, I would invite it,
please.
Mr. Bradley. Well, as we both agree, it's very complicated. There are
members of our association, our industry, that feel that we should pay
copyright only for those imported signals, and there is certainly a lot
of logic to that, and we agree to the logic.
The difficulty that we encounter is trying to develop a formula for
determining the payment on those signals ; it results in copyright pay-
ments by a selected few portions of our industry, and the rest of us
are paying nothing.
Mr. Danielson. Well, I don't have any solution, but I'm seeking it
wherever I can find it ; I don't have any solution.
I'll make one gratuitous comment, though. I would think cable should
look forward, without reluctance, to being classified in something of
the nature of a public utility. You are really in an in-between zone
here. You are allowing local governments to franchise you and reg-
ulate your rates. The FCC says you must carry a local signal, whether
you want to, or not. You have no choice, no discretion, if the local
TV station puts out "Deep Throat," you are going to have to show it;
I guess the same would be true of "The Longest Day," or whatever
that show was.
You are subject to the whims of local regulatory agencies, local rate-
setting agencies. You have very properly stated that local ratesetting
agencies are not sophisticated enough to properly reflect your cost
basis.
I think since you are handled more or less as a utility, you ought to
relax and enjoy it. [Laughter.]
I think that some of the problems could be resolved — that's free.
Thank you.
Mr. Kastenmeier. The gentleman from Massachusetts, Mr. Drinan.
Mr. Drinan. Thank you, Mr. Chairman.
Mr. Bradley, I'm sorry I had to go to another subcommittee, but T
did read your paper and I compliment you on it.
On page 60 you indicate that opinion within the industry is deeply
divided, and I wonder if you could tell us how many people feel that
no copyright liability should attach at all to cable. You indicate the
positions range from that, and I assume that's a minority. I wonder if
they could justify that position on the basis of the CBS-Teleprompter
decision.
Mr. Bradley. I don't know how many there are. We think it is a
minority. I really don't know.
Mr. Drinan. Well, is that minority going to fight for their partic-
ular view that copyright liability should not attach ?
Mr. Bradley. I believe so, yes.
Mr. Drinan. They will justify it?
Mr. Bradley. Yes, sir ; they will attempt to justify it, I'm sure.
Mr. Drinan. But I take it from your testimony that you feel that
copyright liability, rightly or wrongly, will in fact attach.
Mr. Bradley. Yes, sir.
Mr. Drinan. What does the Supreme Court opinion mean on the
Teleprompter decision?
497
Mr. Bradley, Well, in the case of the Supreme Court decision the
court was rendering a decision with respect to the 1909 Copyright Law.
And, of course, when that law was written there was no recognition of
some of the modern technologies, including cable. I believe in their re-
marks the members of the court indicated that they were disturbed
about having to apply a 1909 law to the present day.
So, it is our feeling that the public opinion is such, and that the
rights of copyright holders are such, in certain instances, that they
are entitled to payment, and we are willing to pay. Although, if in its
wisdom the Congress decides there should be no payment for copy-
right, we would be tickled to death. [Laughter.]
Mr. Drinan. Well, I would like to get some reasons why that might
be so. In the Teleproinpter case there is a basis for that, and you say
here the FCC has gone almost contrary to the Supreme Court opinion.
Well, I had several other questions, but my colleagues here, I want
them to question and comment ; and I look forward to your colleagues.
Thank you very much.
Mr. Kastenmeier. The gentleman from New York, Mr. Badillo.
Mr. Badillo. If you agree that there should be a copyright pay-
ment, w^hy must w^e in Congress fix the amount; why can we simply
not say that there shall be a copyright payment, and then leave it to
the normal market forces to say what the payment should be?
Mr. Bradley. The amount of payment is something that in the in-
terest of equity to both the copyright holders, and to our industry
we would like to see fixed. We would like to avoid the possibility of
having an unknown amount established without a real control by us.
And, as I mentioned, the adverse impact on the financial community
is something that is of gi^eat concern to us.
Mr. Badillo. But anybody in business, or in life for that matter,
doesn't have everything fixed; electricity might go up, rent might go
up, why should this be fixed ? What you really mean, you would like
it fixed at a lower amount, we are not talking about, obviously, you
would like a fixed amount at a certain level.
Why should this be different from rent, electricity, paper clips, or
anything else you have in business ?
Mr. Bradley. Well, in the case of the other things that you men-
tioned, there are certain options which are usually available. If the
rent goes up too high you can move to another location, or build your
own building. And in the case of these other things, the moderating
effect of the marketplace, the competitive forces in the country tend
to keep the figures from going totally out of sight. In this case, there
is no such pressure.
Mr. Wiggins. Would the gentleman yield ?
Mr. Badillo. Sure.
Mr. Wiggins. Isn't the real reason that largely you don't originate
grams and there is an infringement before you have any reason to
negotiate.
Mr. Bradley. Yes, sir.
Mr. Wiggins. In other words, they are carrying a signal originated
by somebody else, and there is an infringement before there is any
reason to start talking about a fee.
Mr. Bradley. Yes, sir.
Mr. Badillo. So, then, if you agree there should be a copyright
payment, and there has to be regulation, why should Congress be the
498
one to fix that amount. Isn't it better at all times to have the deter-
mination made by a tribunal who can listen to the arguments on both
sides, a tribunal who can conduct an investigation of the financial cir-
cumstances of the parties involved, and make a reasonable decision,
based upon the circumstances as they come up from time to time?
Mr. Bradley. In a setting of rate by a tribunal, in addition to the
uncertainty that w^orries us, there would be some pretty significant
pressures brought to bear by some of our opponents in this world
Mr. Badillo. There are no pressures brought on Congress, I gather.
Mr. Bradley. I know that, sir. [Laughter.]
But, there are more of you, and we have great confidence in your
ability to set the rate.
Mr. Badillo. I have no further questions.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
Mr. Pattison. Relative to this exemption, this $100,000 gross in-
come exemption, isn't it true that that exemption, if enacted, would
cover most of the rural stations which pick something out of the air,
don't import very much by microwave and other means, and are pri-
marily the people you can make the best argument about that should
not pay copyright fees, as opposed to the local person who picks —
the CATV who picks local signals off the air, and where you get a rea-
sonably good signal anyway ?
Mr. Bradley. Yes. This $100,000 figure would — in round numbers —
exempt systems that have 1,500 subscribers or less, small systems that
have 2,000, or so. But, at least that takes care of the very small one,
the one that is rendering a master antenna system type of service in
the pure sense.
Mr. Pattison. How would you handle the problem where this
$100,000 exemption would provide an incentive to small systems — or
big systems, for that matter — to become a series of small systems?
In other words, you take a situation where you have a variety of
systems in the suburbs that are all served by one head-end and are
owned by the same company, but could be owned by different
companies ?
Mr. Bradley. I believe the bill now has a definition of "system" in
it, that would prevent that. That definition includes all the area served
by one head-end of a cable system.
Mr. Pattison. But there could be a breakpoint where a system
could say, "Well, it's better to install a couple of other head-ends and
get the exemption."
Mr. Bradley. I believe that the cost of installing head-ends would
prevent that, because it's substantial.
Mr. Pattison. OK. Now, another subject. You talk about the black-
out of the nonduplication rule. When you black out a distant signal be-
cause a local system has that particular program on, can you later
broadcast that particular program ? What is the practice ?
Mr. Bradley. No. We cannot rebroadcast it. When a program is
being blacked out, in all but one area of the country it's blacked out
simultaneously with the broadcast which the viewer will see. Now,
this has to do with the network exclusivity. There are two types of
black-outs. One I just mentioned is network, when an imported net-
work signal is showing the same program as the local station, you
black out the imported one and show the local one.
499
The other type of exchisivity is syndicated exclusivity, where a
television station has purchased the right to a particular movie or pro-
gram. That station has the right to prevent us from sliowing that same
program when it's imported from anotlier signal, even though he may
not have shown it.
Mr. Pattison. Would you elaborate a little on that, I missed that.
Mr. Bradley. Yes, sir. When television stations buy program rights
to a particular movie, or syndicated program, they frequently have
an exclusive right in that area. That exclusive right exists even though
they may not have shown that program; and it conceivably even
exists if they may never show that program.
So, that same program being imported from a distance cannot be
shown under the exclusivity rule.
Mr. Pattison. Any time ?
Mr. Bradley. Any time during the period of the contract arrange-
ment.
Mr. Danielson. Will the gentleman yield ?
Mr. Pattison. Yes.
Mr. Danielson. How would you prevent this? If it's coming in by
cable, or microwave, how do you black out this program ?
Mr. Pattison. I think it's done by notification. The local station
has notified the local CATV and says, "We have bought Bambi
Mr. Danielson. Or "I Love Lucy."
Mr. Pattison. But "Bambi" is more likely. [Laughter.]
I know you wanted to buy "Deep Throat" — [Laughter.] And then
they can't show it, I guess.
I'm interested in what your proposal is, that you really eliminate
the nonduplication rules, if we passed the copyright law.
Mr. Bradley. Yes, sir.
Mr. Pattison. Now, the normal argument, transmission or com-
munications argument about that — without regard to copyright-
would have a very serious effect on the local transmission, the frac-
tionalization of the local market. Particularly it would effect, for
instance, the news programs that are produced locally. That is just
about the only thing that is produced locally by local affiliates be-
sides the "Dialing for Dollars" thing they have in the morning. The
whole effort of the local affiliate is really in producing news, and that's
about it ; is that correct ?
Mr. Bradley. Yes, sir ; that is essentially correct.
Mr. Pattison. Well, wouldn't there be a communications effect —
never mind the copyright effect — wouldn't there be a commimications
effect if, in fact, the nonduplication rule were eliminated so you can
always show things while the local news program is on ? Wouldn't that
have an effect on the local advertiser that usually sponsors local news?
Mr. Bradley. If I understand your question correctly — and I hope
I do — there is currently no prohibition against bringing in programs
of an entertainment, or other nature, which compete with the local
news.
Mr Pattison. I see.
Mr. Bradley. And certainly, I would admit that if the local news
is not as attractive to the eyes of a viewer as something else, he is
going to look at something else.
500
I think there might be a beneficial effect in this type of competition,
it will sharpen up the local station so that he will make the news more
attractive.
Mr. Pattison. Well, my point is, if you are going to show a dupli-
cating program — not a news program, but "I Love Lucy," which is a
duplicating program which will be precluded from showing during
the local news time, I mean
Mr. Bradley. I understand now, I did not understand your
question.
Yes. The answer I gave, I guess, would apply here.
Mr. Pattison. My point is, isn't that basically, fundamentally, a
matter of communications policy, as opposed to copyright policy;
couldn't Ave leave that to the FCC ?
In other words, Ave shouldn't be determining here in this committee
whether local neAvs is going to be heard and therefore, all you get is
Walter Cronkite and John Chancellor, and the rest of the people. That
is not really our area, and shouldn't that be left with the FCC ?
Mr. Bradley. Well, I think, sir, that your question poses a theoreti-
cal possibility. In our efforts throughout the years to determine an
instance of actual damage to a broadcaster we haven't found the first
one ; and Ave repeatedly asked for that. So, Avhile there is some theoret-
ical possibility, I think it's probably not a very real one.
I think, too, that we have stood in the past on the position that if
there is a demonstrated harm, we would like to knoAv about it, and we
are Avilling to talk about it and reason.
Mr. Pattison. I just have one otlier question, and that relates to
the whole issue of translators, dealt with on page 19 of your statement.
I Avould just like to have you enlighten us a little bit more about that.
I don't really understand the Avhole mechanism of that, how that Avorks.
Mr. Bradley. A translator is a repeating dcAdce that is established
in areas where there are holidays in the signals of the broad'^asting
station.
Mr. Pattison. And the translatoi-s are installed by Avhom ?
Mr. Bradley. Well, they are variously owned. In some instances
they are OAvned by the bix)adcasting station. In other instances they
are owned by a group of local citizens; and in other instances by a
government agency.
Mr. Pattison. And how does that affect
Mr. Bradley. Well, our point there, is that the bill does not now
assess copyright liability to government-owned translators and we
suggest that they are no different from anybody else.
Mr. Pattison. What Avould the government own a translator for?
Mr. Bradley. That Avould be a local government Avhich would own
it.
Mr. Pattison. Oh, I see, just to impix)ve the signal for the local
people.
Mr. Bradley. Yes, sir.
Mr. Pattison. Or CATV could own a translator, couldn't it?
Mr. Bradley. I don't think so. I think the FCC would prohibit it.
Mr. Pattison. OK. I have no further questions.
Mr. Kastenmeier. Mr. Bradley, I want to thank you on behalf of
the committee for your contribution this morning, the excellent presen-
tation of your association.
501
[The prepared statement of Eex Bradley, and suggested amend-
ments to H.K. 2223 follow :]
Statement of Rex A. Bradley, Chairman, National Cable Television
Association
My name is Rex Bradley, I am Chairman of the Board of the National Cable
Television Association and also President of TeleCable CoriJ., Norfolk, Va., owner
and operator of 15 cable television systems serving 130,000 subscribers in ten
states. Today I speak to you in my capacity as Chairman of NCTA.
The National Cable Television Association is the major trade association rep-
resenting the cable television industry. Our membership includes both multiple
system operators and independent CATV operators, as well as manufacturers
and other suppliers of cable television equipment and services. NCTA's 1,320
member systems currently serve 5.8 million subscribers or 58% of the nation's
10 million cable TV households.
NCTA has previously appeared before this subcommittee to present our views
on copyright revision legislation and also on the newsman's shield issue.
We are, of course, vitally interested in matters affecting the CATV industry
and its subscribers and we thank you for the opportunity to appear before you
and assist you in your deliberations.
Mr. Chairman, since time is limited and there are many groups to hear from,
I will not present a detailed description of cable television, the nature of its serv-
ices, and the future role we believe broadband cable communications will play
in meeting this nation's communications needs. I will be happy to submit this
information for the record, if the committee so desires.
However, I do believe that because of the complexity of the issues now under
consideration, and because of the potential impact on the public and the CATV
industry of the action ultimately taken by Congress on copyright law revision,
it is in order to place into perspective some aspects of the history of cable
development.
I will state at the outset that we believe that copyright was conceived in the
public's interest — to assure that creative minds would be encouraged by
compensation to produce and distribute the fruits of that creativity. Copyright
was not conceived as a mechanism to deny the public access to creative works.
Later in my statement I will discuss further our view of copyright and comment
specifically on HR 2223.
Cable tele\'lsion first developed in the late 1940's in Pennsylvania and Oregon
as a simple "master antenna" service in response to commercial broadcasting's
inability to adequately serve outlying areas. Indeed, by bringing programming to
communities that otherwise would have received none, CATV performed a bene-
ficial role for both broadcasters and the public.
Gradually, broadcasters, perceiving that cable growth could result in addi-
tional competition among broadcasters for audience, began urging Congress and
the FCC to contain cable's growth.
Commencing in the mid-60's and throughout the decade the FCC gradually
extended its jurisdiction over CATV operations. As is well known now, FCC
regulatory actions in 1966 and 1968 imposed a virtual six year freeze on expan-
sion of cable in the nation's largest television markets where approximately
85% of the public resides.
In 1972 the FCC issued its Third Report and Order ^ which was designed to
permit a controlled growth of cable in the larger urban markets. Then FCC Chair-
man Burch characterized the plan as one designed to "integrate cable television
into the national communications structure."
Appended to my testimony (Appendix A) is a summary of those 1972 FCC
regulations which have rightfully been called among the most complex rules and
regulations ever devised by the mind of man.
During the FCC's six year freeze cable growth did not halt completely. Oper-
ators continued to expand in areas where systems were already in operation and
in those limited areas of the country outside of the freeze zone. Also, more atten-
tion was given to providing additional services — ^for example, originating local
community programming — on existing .systems.
As of mid-1975, there were approximately 3,2-^0 cable systems serving nearly
7,000 communities in all 50 states. Nearly ten million American homes received
1 CATV Report and Order 36 FCC 2nd 143 (1972).
502
cable television service, or about 15 percent of the nation's television households.
Franchises have been granted in another 2,600 communities, but are not yet oper-
ating. Applications are pending in approximately 1,000 additional communities.
Subscriber fees for CATV service range from $4 to $11 monthly and average
about $5.50 nationally.
The cable industry employs an estimated 25,000 men and women in manage-
ment, construction, engineering, programming, finance and marketing capacities.
In that necessarily broad sketch of cable's development I have purposely omit-
ted reference to copyright. Let me briefly retrace my steps focusing on the role
the copyright question has played in cable's development.
As cable growth continued, alarmed broadcasters charged that cable television
systems were engaged in "unfair competition" when they carried programs with-
out permission or payment. Those claims of unfair competition were judicially
tested and rejected in 1964 by the U.S. Court of Appeals in tlie 9th Circuit."
During this same period the first copyright suit was brought against two CATV
systems by United Artists Corp. Later a second suit in which the issue went
beyond liability for simple reception was brought by CBS. Primarily due to
adverse rulings by the lower courts in the United Artists case, NCTA publicly
committed itself to work for a legislative solution to the copyright problem and
also undertook negotiations with representatives of the broadcasting and motion
picture industries. Words cannot really refiect the atmosphere in the cable tele-
vision industry following those adverse lower court rulings. The pro.spect was
simply one of total bankruptcy — turning the CATV industry lock, stock and
barrel over to the motion picture industry.
In 1968 the Supreme Court, reversing the lower courts, held in the United
Artists ^ case that CATV was not liable for copyright in receiving off-the-air
signals. Five months later the FCC proposed and adopted as interim procedures
"retransmission consent" rules which required CATV to obtain permission of
broadcast stations and program owners to carry broadcast programs — the very
thing which the Supreme Court had just ruled CATV did not need to do. Needless
to say, in the ensuing four years virtually no such consent was granted.
Negotiations between the cable and motion picture industries continued on the
amount of copyright fees to be paid to copyright holders. Then in 1971, in an
effort to break the regulatory impasse over cable, the Oflice of Telecommunica-
tions Policy and the FCC fashioned the so called "Consensus Agreement" under
which the parties — broadcasters, copyright owners, and cable — affirmed support
for copyright legislation and approved the outline for new FCC cable regulations.
Of course, the Congress was not a party to this agreement.
Subsequently the Supreme Court in 1974 ruled in CBS v. TelePrompTer ^ that
cable television systems were not liable for copyright for carriage of any broad-
cast signals under the meaning of the 1909 law. Following that decision the focus
shifted to Congress and renewed efforts to revise the 1909 law with, among many
other things, provisions for cable television.
I have reviewed these highlights in an effort to demonstrate tlie complexity
of the cable/copyright problem, the intense pressures created for the cable in-
dustry by it, and the almost inextricable interrelationship between copyright and
cable regulation.
During these hearings I am sure you will hear charges — principally from
broadcasting and motion picture representatives — to the effect that the cable
television industry has not lived up to its copyright responsibilities, that cable
is an unfair competitor, and that the industry has attempted to delay resolution
of the copyright issue.
We intend not to engage in "Who struck John" rhetoric in these hearings. I
can only say that throughout this frustrating period NCTA has attempted in
every way possible to live up to its fundamental commitment to work for fair
copyright legislation. Legislation fair to all parties concerned, fair to a young,
developing industry and fair to the present and future CATV sub.scribing public
who most assuredly will be affected by imposition of copyright liability on cable.
As members of this subcommittee may be aware, there are divisions within the
CATV industry over the issue of copyright payments. Positions range from no
copyright liability at all, to no liability for signals received off-the-air, and no
liability for a complement of signals that can reasonably be defined as adequate
service. I believe, however, that the majority of the members of NCTA support
2 Cablevislon, Inc. v. KUTV. Inc.. .335 F. 2(1 348 (9 Cir., 1964).
3 Fortnightly Corp. v. United Artists Television Corp.. .392 U.S. 390 (1968).
« Columbia Broadcasting System v. TelePrompTer Corp., 476 F. 2d 338 (2 Cir., 1974).
503
the Association's efforts to work with Congress in arriving at fair and reason-
able legislation.
Before addressing myself to specific provisions in HR 2223 I would like to
emphasize several key factors which I believe this subcommittee and the Congress
must consider in arriving at fair copyright legislation for CATV.
The Constitution provides for copyriglit protection to promote the progress of
the arts and sciences by giving authors and inventors exclusive right to tlie
product of their creativity for a limited period of time. However, the courts have
recognized that copyright protection has a two-fold purpose; to encourage
creativity and to promote the dissemination of knowledge to the public. It is
necessary to maintain a balance between encouraging creativity through a lim-
ited monopoly, and the paramount interest of the public in unrestricted freedom
to use the works of others after authors have harvested their rewards.^ Conse-
quently, copyright legislation is not only for the benefit of the owner of a work,
but equally as important, for the benefit of the public.
In this context it is important to keep in mind that cable television through its
reception and distribution of television broadcast signals, promotes the dissemina-
tion of knowledge to the public. Indeed, without this service, which is well-
valued by a growing percentage of the population, significant number.s of Amer-
icans would be denied the fruits of creative labor. Congress should be cognizant
of this vital CATV role. Legislation which, for whatever reason, restricts or
decreases the dissemination of knowledge to the CATV public would not be con-
sonant with the primary public interest concern of copyright.
Secondly, the Congress should be aware that imposition of copyright liability
will have an impact on the CATV subscribing public. As mentioned, those sub-
scribers value highly their CATV service. I am sure that members of this sub-
committee have on occasion heard from CATV subscribers when those subscrib-
ers felt that Federal regulations or law threatened them with loss of program-
ming. To a significant extent the cost of copyright liability will be borne by cable
subscribers.
Let me make several further observations on the current financial state of the
industry. It has taken several years, but an awareness is growing that CATV is
not the pot of gold it was once thought to be. Last year, for example, nine of the
top publicly held companie.s — companies who will bear a very sizeable percentage
of the copyright burden — suffered a combined net loss of nearly $17 million on
total revenues of $267 million.
CATV is a capital intensive business. It is also a business whose expenses,
for the most part, are fixed and subject to very little infiuence of the CATV
manager. Many expenses are subject to the same iufiationary pressures ex-
perienced generally throughout the country, with the normal competitive in-
fluences between suppliers tending to moderate the rate of increase. However, in
addition, cable systems experience a number of substantial expenses, whose levels
are established arbitrarily by some authority not subject to the moderation of
competitive pressures. Some of these expenses are subject to change with little
opportunity of the CATV operator to influence the level. Examples of these are
pole rents, microwave charges, interest, franchise taxes, property taxes, and FCC
fees.
Because most cable expenses are fixed, the only opportunity for cable opera-
tors to obtain and maintain a favorable profit margin is through additional sub-
scribers, or by increasing subscriber rates (often difficult because city council
approval must be obtained) .
The uncertainties related to these uncontrollable expenses make financial
planning and borrowing diflScult and expensive. Appendix B contains further
detailed information on the financial impact of copyright lial)ility for cable.
Let me now turn to the specific provisions of HR 2223. Chapter 8 of the bill
would create for the first time a Copyright Royalty Tribunal in the Library of
Congress. This Tril)unal would be composed of three persons and would be em-
powered by statute to adjust copyright royalty rates, the revenue base, and in
certain circumstances the distribution of royalty fees. The Tribunal is directed
to undertake a review of royalty rates within six months of the date of enact-
of the law, and that review is to be completed within 18 months. Thenceforth, the
Tribunal would conduct a review every five years ad infinitum.
Mr. Chairman, we are opposed to the estal)lishment of this Tribunal, and we
further believe that Section 8 of the bill is laced with infirmities that represent
a very serious threat to the future viability of the cable television industry and
5 Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932).
504
to the services the industry hopes to offer to the public. Let me explain. This
Tribunal carries with it the potential for substantial escalation of copyright fees
in a very short period of time. The Office of Telecommunications Policy has al-
ready pointed out the damaging effect this imcertainty and lack of stability can
have. You will hear further about the impact of uncertainty on cable's growth
by a representative of the financial community following my presentation. I do
not think I exaggerate when I say that virtually any significant copyright pay-
ment by this industry represents a financial burden. An imknown periodic review
as mandated in this bill presents, in my opinion, not potential, but actual grave
economic problems to a growing industry, one that is voraciously capital inten-
sive in its formative stages. You are aware of the difficulties that all high risk
businesses are now facing in obtaining short term financing. I do not wish to
plead economic hardship to this subcommittee, but plead I must. We in this
industry know too well the economic realities.
Further, Chapter 8 contains no criteria to guide Tribunal review of rates ; it
contains no provision for judicial review of the Tribunal's decision other than
for fraud ; and in our opinion it provides for no effective Congressional review.
In short, we find this section of the l)ill fraught with uncertainty, an uncertainty
that I submit this industry can ill afford.
I would like to suggest a more reasonable approach to the issue of insuring
fair rates in the future. Such an approach is already contained in the bill.
Section 111(d) provides for the establishment of a compulsory license for
secondary transmissions by cable systems. Royalty fees are computed on the basis
of specified percentages of gross receipts from subscriber revenues from basic
cable service. The applicable percentages increase according to the revenues or
size of a cable system. We believe that a progressive fee schedule based on per-
centages represents an eminently logical and reasonable approach to increasing
fees. It substitutes marketplace economics for arbitrary decisions. It has the
logic of a graduated income tax without the loopholes. The revenues derived by
copyright owners from cable will increase, as the cable system revenues increase.
Such an approach takes both the industry's growth and inflation into account.
If cable television is to grow and prosper, so will the owners of copyrighted
product sliare in that growth and prosperity.
In summary then, we strongly urge this subcommittee to retain the approach
of a progressive fee schedule based on a i)ercentage of revenues, and discard the
concept of periodic review. Such an approach avoids the need to establish yet
another bureaucratic procedure and substitutes a logical and simple approach
for an arbitrary and complicated one.
Section 501 of HR 2223 deals with infringement of copyright. Subsection (b)
thereof entitles the copyright owner to initiate action for infringement of copy-
right. We have no objection to that provision. However, subsection (a) grants
a television broadcast station rights as legal or beneficial owner of a copyright
for purposes of instituting action for infringement. We very strongly object to
this provision.
As you know, the rights to most television programs are held, not by the broad-
caster, but the copyright owner. In tho.se ca.'-es. where the television station does
hold the copyright he is fully protected for infringement under subsection (b).
However subsection (c) would grant to hundreds of broadcasters across the
country the right to institute harassing suits against cable operators for very
minor or even inadvertent violations of FCC regulations. Such a provision is, we
think, an aberration and one unprecedented in copyright law. It should be
stricken from the bill. Adequate remedies for violations of FCC regulations are
available under the Communications Act.
In any event we believe that this subcommittee's report should make clear
that inadvertent violations of FCC rules do not constitute infringement of
copyright.
Mr. Chairman, in earlier testimony before this subcommittee Deputy Assist-
ant Attorney General Irwin Goldbloom of the Justice Department stated :
"We strongly urge, with respect to (b) [where the CATV .system is, in whole
or in part, within the local service area of the primary transmitter] that the
secondary tran.smittal should be completely free of liability ; lience, royalty free
or no licensing would be in order. The secondary transmission in such a situation
where the CATV system is, in whole or in part, within the local service area of the
primary transmitter, finds the cable system only filling gaps or improving recep-
tion in the service area of the primary transmitter, supplementing the primary
tranmission. Such transmission does not impair the primary transmitter's mar-
505
ket\ in fact, it enhances it. The copyright holder is helped and not hurt by such
activity." [Emphasis added.]
In short the Justice Department has recommended that there be an area of
"free use" with respect to CATV distribution of local broadcast signals. NCTA
fully supports this line of thinking We note also that Thomas Keller, Acting
General Counsel of OTP, stated to the subcommittee last week that local signals
should not be liable for copyright.
While Mr. Goklbloom aid not suggest to this subcommittee a method or mech-
anism for imposing liability only on signals outside that area of "free use", the
logic of his recommendation is undeniably sound. NCTA has internally addressed
this question in great detail. We have researched and studied a variety of possible
approaches to the Justice Department's concept of an area of free use.
We have, however, determined that it is impossible to arrive at a free formula
embodying this concept applied on a system-by-system basis, which does not
discriminate unfairly against one portion of the cable television industry, and
consequently against the public receiving service from such systems.
We believe that the concept advanced by the Justice Department can and
should be embraced in the following manner. Copyright liability for CATV dis-
tribution of broadcast signals should be imposed without respect to carriage
of signals. There appears to be no fair way to impose liability for carriage of
certain signals and not others.
By retaining the present fee schedule in HR 2223 and exempting from liability
the first $25,000 in gross quarterly subscriber receipts for all cable television sys-
tems, copyright legislation can fairly take into consideration that portion of cable
service which fills gaps or improves reception in the service areas of broadcast
stations.
We point out that such an exemption involves a reasonably small dollar amount
in relationship to the total copyright revenues to be derived from cable now and
in the future. It also has the benefit of providing some degree of relief to the
smaller traditional community antenna systems. The owners of copyrighted
product themselves have frequently stated that they are not primarily con-
cerned with this type of cable system. Indeed the 1971 Consensus Agreement
envisioned a total exemption from liability for many cable systems serving
fewer than 3500 subscribei's. The blanket exemption we propose would have the
practical effect of exempting nearly all systems with fewer than 1500 subscribers.
The reduction in revenues derived from larger cable systems, particularly in
the larger television markets which the copyright owners have targeted as the
primary source of future revenues, would be quite small as a percentage and of
course, new revenues generated by cable system growth would be fully assessable.
We believe this kind of exemption to be an equitable and fair approach to the
problem of copyright liability for local signals. We submit for your serious con-
sideration an amendment to achieve this.
Mr. Chairman, I will now turn to the third matter NCTA would like to
comment on in relationship to HR 2223. Several times in my testi-
mony I have alluded to the FCC's cable television regulations and to the close
historical interrelationship between copyright and regulation as applied to cable.
I would again urge the members of this subcommittee to read those regulations.
For your convenience the most pertinent of those regulations are printed below'.
SYNDICATED EXCLUSIVITY
§ 76.151 Syndicated program exclusivity ; extent of protection.
Upon receiving notification pursuant to § 76.155 :
(a) Xo cable television system, operating in a community in whole or in part
within one of the first fifty major television markets, shall carry a syndicated pro-
gram, pursuant to § 76.61 (b), (c), (d), or (e), for a period of one year from
the date that program is first licensed or sold as a syndicated program to a televi-
sion station in the United States for television broadcast exhibition ;
(b) Xo cable television system, operating in a community in whole or in part
within a major television market, shall carry a syndicated program, pursuant to
§§76.61 (b), (c), (d), or (e), or 76.63(a) (as it refers to §76.61 (b), (c), (d), or
(e) ), while a commercial television station licensed to a designated community in
that market has exclusive broadcast exhibition rights (both over-the-air and by
cable) to that program : Provided, however, That if a commercial station licensed
to a designated community in one of the second fifty major television markets
has such exclusive rights, a cable television system located in whole or in part
57-786 O - 76 - pt.l - 33
506
within ttie market of such station may carry such syndicated programs in the
following circumstances :
(1) If the program is carried by the cable television system in prime time and
will not also be broadcast by a commercial market station in prime time during
the period for which there is exclusivity for the program ;
(2) For oft'-network series programs :
(i) Prior to the flrst non-network broadcast in the market of an episode in the
SGriGS '
(ii) After a non-network first-run of the series in the market or after one year
from the date of the first non-network broadcast in the market of an episode in
the series, whichever occurs first ;
(3) For first-run series programs :
(i) Prior to the first broadcast in the market of an episode in the series ;
(ii) After two (2) years from the first broadcast in the market of an episode
in the series ;
(4) For first-run, non-series programs :
(i) Prior to the date the program is available for broadcast in the market
under the provision of any contract or license of a television broadcast station
in the market ;
(ii) After two (2) years from the date of such first availability ;
(5) For feature films :
(i) Prior to the date such film is available for non-network broadcast in the
market under the provisions of any contract or license of a television broadcast
station in the market ;
(ii) Two (2) years after the date of such first availability ;
(6) For other programs: one day after the first non-network broadcast in
the market or one year from the date of purchase of the program for non-network
broadcast in the market, whichever occurs first.
Note 1 : For purposes of § 76.151, a series will be treated as a unit, that is :
(i) No episode of a series (including an episode in a different package of pro-
grams in the same series) may be carried by a cable television system, pursuant
to §§76.61 (b), (c), (d),or (e) or 76.63 (a) (as it refers to §76.61 (b), (c), (d),
or (e) ) while any episodes of the series are subject to exclusivity protection.
(ii) In the second fifty major television markets, no exclusivity will be afforded
a different package of programs in the same series after the initial exclusivity
period has terminated
Note 2 : As used in this section, the phrase "broadcast in the market" or
"broadcast by a market station" refers to a broadcast by a television station
licensed to a designated community in the market.
NETWORK EXCLUSIVITY
§ 76.92 stations entitled to network program nonduplication protection.
(a) Any cable television system which operates in a community located in
whole or in part within the 35-mile specified zone of any commercial television
broadcast station or within the secondary zone which extends 20 miles beyond the
specified zone of a smaller market television broadcast station (55 miles alto-
gether), and which carries the signal of such station shall, except as provided
in paragraphs (e) and (f) of this section, delete, upon request of the station li-
censee or permittee, the duplicating network programming of lower priority sig-
nals in the manner and to the extent specified in §§ 76.94 and 76.95.
(b) For purposes of this section, the order of nonduplication priority of televi-
sion signals carried by a cable television system is as follows :
(1) First, all television broadcast stations within whose specified zone the
community of the system is located, in whole or in part :
(2) Second, all smaller market television broadcast stations within whose sec-
ondary zone the community of the system is located, in whole or in part.
(c) For purposes of this section, all noncommercial educational television
broadcast stations licensed to a community located in whole or in part within a
major television market as specified in § 76.51 shall be treated in the same man-
ner as a major market commercial television broadcast station, and all non-
commercial educational television broadcast stations not licensed to a community
located in whole or in part within a major television market shall be treated in
the same manner as a small market television broadcast station.
(d) Any cable television system operating in a community to which a 100-watt
or higher power translator station is licensed, which translator is located within
507
the predicted Grade B signal contour of the television broadcast station that the
translator station retransmits, shall upon request of such translator station
licensee or permittee, delete the duplicating network programming of any televi-
sion broadcast station whose reference point (See § 7U.53) is more than 55 miles
from the community of the system.
(e) Any cable television system which operates in a community located in whole
or in part within the siiecified zone of any television broadcast station or within
the secondary zone of a smaller market television broadcast station is not re-
quired to delete the duplicating network programming of any 100-watt or higher
power television translator station which is licensed to the community of the
system.
(f) Any cable television system which operates in a community located in
whole or in part within the secondary zone of a smaller market television broad-
cast station is not required to delete the duplicating network programming of any
major market television broadcast station whose reference point (See § 76.53) is
also within 55 miles of the community of the system.
It has been remarked, and I think not too facetiously, that while the Congress
has been laboring to develop copyright provisions applicable to cable, the FCC
has for some time now been guarding the copyright gate by promulgating copy-
right regulations of its own.
i^arlier this year, in an address to the NCTA Convention, Barbara Ringer, Reg-
ister of Copyrights, stated that the FCC rules "contained the most elaborate
copyright provisions I have ever seen anywhere." She continued :
"I don't know much about communications law, but I know copyright law wiien
I see it, and the exclusivity provisions of the FCC regulations are copyright
regulations ; in effect, the enactment of a copyright law through the regulatory
process. And they are unquestionably the most complex and difficult to under-
stand of anything I've ever read in this field.-"
Absent legislation, or specific Congressional direction, and in spite of Supreme
Court decisions, the Federal Communications Commission has consistently
invoked copyright principles to protect broadcasting from competition. The
pervasive nature of the Commission's forays in a variety of regulatoiw matters
into exclusivity of all tyi^es is in and of itself a subject for broad independent
investigation.
For the purposes of these hearings, however, one thing ought to be indis-
putably clear. While the FCC's 1972 rules have granted cable systems the right
to carry a limited number of broadcast signals, that right — and the value and
marketability of those signals for cable operators — has in very large part been
negated by the Commission's syndicated and network program exclusivity pro-
visions. Stated in the simplest of terms, a cable operator has the right to carry
signals, but the obligation to black out most of the programming on those signals.
And this is achieved through the Commission's "copyright regulations."
For example, the cable system under construction in Wauwatosa, Wis.
must under the FCC's syndicated exclusivity regulation black out 62 percent of
tlie programming on one channel it imports, and 58% on the other channel.
What, the operator can fairly ask, is the value of carrying the signal? Appendix C
contains a more detailed explanation of this problem.
It ought to be beyond any logical dispute tliat if cable systems are to incur
liability for the distribution of these signals, then they should have the right to
show what has been paid for. Yet if copyright legislation with provisions for
cable television were enacted today, that would not be the case. We believe it is
imperative that the Congress address this matter. This should be done in this
legislation, and we are submitting language to accomplish this aim.
Before concluding, Mr. Chairman, I would like to draw the subcommittee's
attention to several additional recommendations for perfecting changes in
section 111 of the bill.
Section 111(b) of HR 2223 appears to make the secondary transmission of
over-the-air pay-televi.sion (STY) signals an act of infringement and one sub-
ject to civil and criminal penalties. This subcommittee should be aware that
Federal Communications Commission regulations require CATV systems to
carry the signals of all television broadcast stations in specified geographical
areas regardless of whether those signals are originated by commercial broad-
cast stations or STV stations. Therefore, under Section 111(b) the cable system
would be faced with either violating FCC rules and regulations or the copyright
law. Consequently we urge that Section 111(b) be amended so as not to apply
to the required carriage of an STV signal.
508
Next, section 111(a) (4) exempts government-owned and non-profit translators
from the requirement to pay fees. As a matter of law, we believe that no rational
distinction can be made between CATV systems whose purpose is to improve
reception of television signals and translators which serve the same purpose.
Additionally, of course, HR 2223 does not exempt non-profit and government-
owned CATV systems. Should not such translators be placed on an even competi-
tive footing with commercial translators and cable systems V
Third, section 111(a) (3), as currently drafted, raises the possibility that cable
operators providing leased channels to the public or others could incur copy-
right liability for the material programmed on those channels by the lessees. Fed-
eral Communications Commission regulations require that certain cable systems
make available channels for lease on a non-discriminatory basis and that the
cable operator may exercise no control over the program content on those chan-
nels. We respectfully suggest that the language of section 111(a) (3) be changed
to insure that the cable operator does not incur copyright liability on leased
channels. The lessee, of course, would remain liable for the payment of copyright.
Finally, portions of section 111 and the language of section 801(b) raise the
possibility that copyright fees in the future could be based on cable revenues
from sources other than basic CATV distribution of broadcast signals.
I believe it is not the intent of Congress to imix)se copyright liability on cable
operations beyond the basic reception service, and indeed there would be no
logic to such an approach. The liability contemplated in this legislation has no
relationship to revenues derived from local origination, pay cable operations or
any other such service initiated by a cable operator. In those specific cases
copyright will have already been paid. Revenues derived from other potential
services, meter reading, for example, have no connection with copyright. Again,
Mr. Chairman, there would clearly seem to be no equity or logic in such an ap-
proach. We are submitting suggested clarifying language to deal with this issue.
In conclusion, Mr. Chairman, I would like to state that NCTA has for eight
years now worked hard under trying circumstances to assist in achieving fair
and reasonable copyright legislation for CATV. We will continue those efforts,
and we stand ready to assist this subcommittee in every way possible. I will be
happy to respond to questions.
Appendix A. — Summary of FCC Cable Television Rules
In United States v. Southwestern CaUe Co., 392 U.S. 157 (1968), the United
States Supreme Court established that CATV systems were interstate operations,
properly to be regulated by the Federal Communications Commission. The Court
stated, at pages 168-169 :
"Nor can we doubt that CATV systems are engaged in interstate communica-
tions, even where, as here, the intercepted signals emanate from stations located
within the same State in which the CATV system operates. We may take notice
that television broadcasting consists in very large part of programming devised
for, and distributed to, national audiences ; respondents thus are ordinarily em-
ployed in the simultaneous retransmission of communications that have very
often originated in other States. The stream of communication is essentially
uninterrupted and properly indivisible. To categorize respondents' activities as
intra-state would disregard the character of the television industry, and serve
merely to prevent the national regulation that 'is not only appropriate but essen-
tial to the eflicient use of radio facilities.' " (Citation and footnote omitted.)
Subsequently, detailed regulations of the FCC were upheld in Black Hills
Video Corp. v. United States, 399 F.2d 65 (8 Cir., 1968) .
CATV systems are governed by comprehensive regulations of the Federal Com-
munications Commission (See, 47 C.F.R. 76.1 et scq.). The Commission's regula-
tory scheme varies, depending on the location of a community within which a
CATV system operates, as that community is related to communities designated
by the Commission as a "television market." The regulations further distinguish
between "major" television markets (which are divided into "Top-50" and "Sec-
ond-50" markets) and "smaller" television markets.
The major television markets in the country, defined by 35 mile circles around
a central point in each market, contain about 85 percent of the population of
the United States. This large area has only recently been opened to develop-
ment by cable television.
Early federal regulations attempted to establish some kind of a formative direc-
tion for cable television as it existed then. In the more than seven years that have
followed, the Federal Communications Commission has adjusted its regulatory
509
program to reflect changes in the cable television technology. So, when we talk
about the regulatory atmosphere within which cable television now must oper-
ate, there are essentially four ditterent areas.
First, there is the area regarding the delivery of signals which are received
off the air. Then there is tlie delivery of the nonbroadcast signals. Then there are
technical standards imposed upon the industry. And, lastly, there is an attempt
to resolve the very ditficult problem of the relationship between Federal, State,
and Local regulatory jurisdictions.
The number of television broadcast signals that cable TV systems are allowed
to carry is determined by their geographic location. If they are in one of the 50
largest markets in the country, they are entitled to carry three full network
stations, three independent stations and an unlimited number of "unobjected to"
educational television stations as well as an unlimited number of non-English
language broadcast stations. In small markets, there is no provision for the
importation of two "wild-card" signals.
This means that the cable television operator who faces entry into any locality
must measure the available signals off-the-air, fit them to this complement, which
the FCC allows him to carry, and then see if he can find an attractive combina-
tion which will allow him to market his service.
As a limitation on what the CATV operator can do with those signals, the
FCC has incorporated a copyright concept : the concept of program exclusivity.
That means if a local television station is broadcasting "I Love Lucy" at 6:00 at
night and a station which a CATV operator is importing from a distant market
also broadcasts "I Love Lucy" at the same time period, then "I Love Lucy" on
the distant, or imported, signal must be blacked out, so that the viewers cannot
see "I Love Lucy" on the distant channel. Viewers are forced to turn to their
local channel if they want to watch "I Love Lucy." That is the effect of nondupli-
cation, or copyright exclusivity, written into federal regulations.
There are two types of exclusivity which the FCC has imposed on cable tele-
vision. One is for network programs. There the time period is simultaneous. This
means that a network show, "Dean Martin," being broadcast at 9 :00 locally and
the more distant station also broadcasts "Dean Martin" at 9:00, then "Dean
Martin" on the distant station must be blacked out.
But the network exclusivity rules are much more complicated than this simple
description. There are complicated mileage zones of protection of various sizes
drawn around television markets. A 35-mile circle will be drawn around major
markets (top 100) and a 55-mile circle around minor markets, with certain refine-
ments. Examples : (1) 54 miles from two minors, no protection ; (2) 54 miles from
one minor and 34 miles from another minor, protect second minor; (3) 34 miles
from a minor and a major, no protection ; (4) 34 miles from a minor and 54 miles
from a major, protect minor; (5) 54 miles from a minor and a major, no
protection.
In addition, there is a very complicated system of non-network exclusivity :
What the Commission calls "syndicated exclusivity."
In these 50 largest televi-sion markets the rules provide for one year protection
(pre-clea ranee) from the date that a wholly newly created program is first sold
or licensed anywhere in the country. During that year CATV systems may not
import such programs into any of the top 50 television markets. Thereafter local
stations will be protected for the run of their exclusive copyright contract. These
contracts generally run from 4-7 years. CATV systems would not be permitted
to carry films or series under contract irrespective of whether these programs
are actually being shown on the local station.
In television makets 51-100, the rules break down programs into essentially five
categories — off-network series, first-run series, first-run nonseries, feature films,
and "other programs" which are really off-network specials. When I say "off-net-
work special" that means that a special has had exhibition on a television broad-
cast network sometime in the past. The time period is not "simultaneous" in these
cases ; it varies from one to two years. In some cases, CATV can carry a program
broadcast on a distant station one day after it's broadcast on a local station, but
exclusion lasts no longer than one year from the first market purchase or non-net-
work broadcast in the local market. This system is a very complicated control of
what the CATV operator has to do with respect to "blacking out" signals from
distant stations, and are limitations on the use of programs on the distant signals.
In addition, the FCC has moved into the new area of delivery on nonbroadcast
signals — the cablecasting or narrow-casting of channels.
New systems in a major television market must also have a certain minimum
channel capacity. That channel capacity, as it breaks down into layman's Ian-
510
guage is 20 channels — twenty 6 MH^ channels (a 6 MHz channel is a television
channel). It must also provide for equivalent bandwidth so that if it receives
off-the-air at its head-end antenna and delivers 12 television signals, it must have
a system capacity of 24 channels. So, for each off-the-air television channel
delivered the system must also have the capacity of providing one other channel
for nonbroadcast purposes. The use of those channels is for the primary purpose
of delivery of non-decoded, nonbroadcast signals ; or, for the use of nonbroadcast
decoded signals ; that is, pay TV by wire. The new rules also provide that all new
systems in the major markets must have two-way capacity for nonvoice return
signals.
The federal regulations also provide that all the new CATV systems have to
provide room for access channels. Access channels are divided into essentially
four categories. First, there is a public access channel, which must be available
for anyone to come in off the street and say his piece. That channel must be
nondiscriminatory, it must be non-commercial, it may not make any charges at all
except for live production costs of over five minutes in the studio. In addition,
the CATV system is required to have the minimal equipment and facilities neces-
sary so that the public can use this channel.
Second, federal regulations require provision of an educational television
access channel, which must be provided by the CATV system free for the first
five years after the completion of the system's trunk line cable. The purpose of
the free five-year period, according to the FCC's reports, is to encourage tlie
innovative use of educational television on cable systems. Third, there is a
requirement that new systems must have a "government" channel which also
must be free for five years after the completion of the trunk line. Fourth, there
is the requirement that cable systems must have at least one "leased" channel
available for any purpose at all, on either an hourly basis or on a total channel
leased basis. There is one other featui'e of this access channel proposal : The
delivery of nonbroadcast signals. That is the requirement imposed by the federal
government for an expansion of that access channel capability, provided that on
80 percent of the weekdays (Monday through Friday) the channels are used for
80 percent of any three hour period in that time, for six weeks running. Tlie CATV
system has six months within which to provide an additional channel for these
uses. If that access user can supply the product to fill that channel he can then
spill over into these other channels until 80 percent of the time in any three-hour
period for 80 percent of the weekdays is filled ; then he is entitled to still another
channel, and that will go on and on as the demand increases.
There are operating rules which the FCC has provided for these channels. For
example, on the educational channel, there can be no commercial advertising,
there can be no lottery information, there can be no indecent or obscene material,
and records of the use of these educational channels must be kept by the cable
system operator for at least two years.
The final area concerns franchise standards. These franchise standards were
adopted by the FCC out of concern about the proper relationship between the
local and the federal governments. Every new franchise must weigh, in a full
public hearing, the applicants' qualifications, as to their legal competency, their
character, financial capability, and technical capacity. The franchise must require
that there be significant construction of a CATV system within one year, and
the FCC says that they think about 20 percent per year is reasonable. There must
be an equitable and reasonable extension of the trunk line in every succeeding
year until every person in the community is capable of being served, and the
CATV system must reach a substantial percentage of its franchise area. The
FCC also provides that all new franchises must be of fifteen-year duration. There
must be approval by the city fathers of an initial subscriber rate : and approval
of requests for increases in that rate, including the installation rates and the
subscriber rates. There also must be in every new franchise a procedure for the
investigation and resolution of complaints and there must be maintenance of a
local business office or agent by the CATV system in the community for that
purpose.
CATV systems operating as of March 31. 1972, are grandfathered, that is they
do not have to comply with these regulations until March 31 of 1977, or until
the end of their franchise period if it is earlier than that date.
In addition, the regulations also contain the following rule, found at 47 C.F.R.
,§ 76.7(a) :
"On petition by a cable television system, a franchising authority, an appli-
cant, permittee, or licensee, of a television broadcast, translator, or microwave
relay station, or by any other interested person, the Commission may waive any
511
provision of the rules relating to cable television systems, impose additional or
different requirements, or issue a ruling on a complaint or disputed question."
(Emphasis added.)
National Cable Television Association,
Public Affairs Department,
Washington, D.V., Aiiyitst 1, 1915.
Hon. Robert Kastenmeieb,
Vhuirmau, ISuOcvmmittec on Courts, Civil Liberties, and the Administration of
Justice, Nayhurn Building, Washington, D.C.
Dear Congressman Kastenmeier: NCTA is pleased to submit the enclosed
supplemental statement in connection with the Subcommittee's current consider-
ation of revision of the copyright law. The statement addres.ses a number of
issues which arose during the June 11-12 hearings, and which we believe require
amplification or clarification.
We shall be happy to respond to any further requests for information or
questions by the Subcommittee.
Sincerely,
Rex a. Bradley, National Chairman.
Enclosure.
Memorandum from the National Cable Television Association
Concerning H.R. 2223
During the copyright subcommittee hearings on H.R. 2223 June 11-12 a number
of questions arose concerning aspects of NCTA's position on H.R. 2223. While
many of these questions were resolved during the hearings, NCTA would like
to take this opportunity to offer the following supplementary statement on
matters discussed during tlie liearings. These matters include NCTA's views with
respect to the Copyright Royalty Tribunal and projections regarding the amount
of copyright revenues to be paid by the cable industry under NCTA's proposed
amendments to H.R. 2223, information concerning the sale of commercial pro-
gramming to the television networks and syndication of programming to local
teleA'ision stations, and the provision of H.R. 2223 granting rights to broadcast
stations as legal or beneficial owners of a copyright for purposes of instituting
infringement actions.
the copybight tribunal
In its formal statement before the subcommittee, NCTA strongly objected to
the establishment of a copyright tribunal as specified in H.R. 2223 with the
imcertainty and vagueness inherent in the tribunal's power.
NCTA believes that the threshold question which Congress must address in
this regard is the very concept of the tribunal itself and not merely the infirmi-
ties present in Chapter 8 of the bill.^
There are three basic and interrelated arguments advanced in favor of estab-
lishing a copyright tribunal with broad powers: (1) the Congress does not have
the capability to make informed decisions in this area (2) since Congress is
"fixing" copyright fees in legislation a periodic review is essential and (3) it is
necessary to have an impartial and unbiased authority to examine facts and
weigh data in order to fairly adjust future royalty rates for CATV. While at
first glance these arguments appear to be reasonable, they do not stand up to
logical analysis.
There is no basis for assuming that an inexpert appointed body will be
capable of making informed decisions about copyright royalty rates. Specifically
what data and which facts are to be utilized by the tribunal in adjusting rates?
None are specified. Is it to be a cable system's gross revenues, its net, its margin
of profit or loss? Is it related to the number of broadcast channels a system
carries, the number of programs it carries, or only the number of programs a
system distributes which do not have to be blacked out because of FCC regula-
tions? Will it relate to the rates charged by a cable system? The same questions
can be asked on the copyright side. It should be obvious that no one of these
factors represent data and facts from which a fair fee schedule can be derived.
Absent any criteria or methodology in the legislation for adjusting rates, an
inexpert authority is, at best, being asked to render a Solomon-like decision
1 As previously pointed out by NCTA, those infirmities include inadequate Congressional
and judicial review procedures, the power of the tribunal to change the "revenue base",
and the lack of criteria and standards governing operation of the tribunal.
512
without the benefit of either practical guidance or divine inspiration. It is quite
likely that the evidence presented to this review body will tend to be incon-
clusive or at least widely disparate. (We note for example, that the copyright
owners have argued that a fair level of copyright payments for CATV would
be in the range of 16-20% of gross revenues. )
The point is that because of the unique nature of the cable/copyright matter
any decision about CATV royalty rates will tend to be an arbitrary one. Com-
parisons with other approaches to compulsory licensing of copyrighted material
are not necessarily valid. The cable copyright issue proceeds outside most market-
place considerations, and has a unique relationship to regulatory factors. Con-
gress, with its responsibility for oversight ana review ui tne FCC and the
regulatory process, is the only body which can fully evaluate and weigh these
factors.
For the same reasons, there is little logic to the argument that Congress does
not have the capability to deal with the copyright rate matter. On an issue which
will have a direct impact on the public. Congress is the most appropriate body
to attempt to achieve a fair resolution. It is Congress which is charged by the
Constitution with the responsibility and authority for national copyright policy.
The Congress should not shirk its responsibilities in this area. Its goal ought
to be to arrive at an equitable solution keeping uppermost in mind the rights
and desires of the public. NCTA respectfully submits that this public interest
standard will not be met by avoiding the issue and setting in motion a new and
unnecessary bureaucratic process with the attendant forms and procedures
which too often plague small businesses and ultimately, the consumer.
Hardly will the new law (with a Congressionally established progressive fee
schedule) have been in effect when a tribunal will be required to reexamine the
Congress' work. And even assuming that criteria to guide a tribunal could be
developed and were set in the bill, it is highly unlikely that any substantive
data would emerge in such a short period of time to warrant a review of rates
or to justify any adjustment of those rates.
Finally, copyright interests have attempted to plant the impression that tri-
bunal review is necessary because Congress is proposing to fix the CATV fee
schedule in legislation. This "fixed fee" argument is a spurious one. Royalty
fees are to be computed on the basis of escalating percentages of gross receipts
from subscriber revenues, not fixed fees. In essence, what the copyright interests
are seeking is not one, but two methods to guarantee that future copyright reve-
nues will rise sharply. They seek a progressive fee schedule and a mandated
periodic review.
The progressive fee schedule represents a logical marketplace approach. Stated
simply, as a CATV system's revenues increase so do copyright revenues. Con-
versely, under the approach currently contained in the bill a cable system could
find itself in the anomalous position of losing money and having both its gross
revenues and net revenues decreasing while its copyright payments are increas-
ing. There is no equity and logic in freezing in legislation such a marketplace
aberration.
Additionally, it should be understood that while the initial impact of copy-
right liability on an industry-wide basis does not appear to be excessive, the
capacity of individual cable systems to absorb the added burden of copyright
payments varies widely. For many systems the addition of copyright payments
on top of pole attachment rentals, franchise levies, and annual FCC subscriber
fees will significantly reduce the system's operating ratio. NCTA has previously
pointed out that in many cases cable systems have been unable to secure rate
increases from local rate reviewing authorities to offset increases in operating
expenses. For example, cable systems in Charleston and Morgantown, W. Va.
have been denied rate adjustments even though their last increase was in 1965 ;
the Pottsville, Penn. system which last increased rates in 1963 has been denied
a rate hike ; the Santa Cruz, Calif, system has been denied an increase although
it has not had one in 18 years.
The point is that by tying the prospect of future royalty increases to the
percentage mechanism currently contained in H.R. 2223, a closer marketplace
determination of future copyright fees will result.
NCTA believes that Congress must be fully cognizant of all the ramifications
of the current tribunal approach. In dealing with the issue of future copyright
royalties Congress should strive for a simple and clear methodology for assuring
that all parties — including the CATV viewing public — are treated fairly.
NCTA is convinced that a graduated royalty payment scale based on a per-
centage of each CATV system's gross subscriber revenues represents the best
approach to adjusting future copyright payments.
513
FTTTUBE COPYBIGHT PAYMENTS
During the subcommittee's hearings copyright interests went to great lengths
to emphasize that CATV's copyright liability would amount to only a small
percentage of the industry's gross revenues and that the industry could easily
afford to pay this amount.
Based on this argument, the copyright owners then go on to claim that the fee
schedule currently contained in the bill should be increased.
Congress should not be fooled by this line of reasoning. It should be fully aware
of the impact the future growth of the cable television industry (which now
serves only 14 percent of the nation's television homes) will have on future copy-
right payments.
If H.R. 2223 were law today and contained the NCTA proposal exempting from
copyright liability the first $100,000 of each CATV^ system's annual basic service
revenues, the cable television industry's 1975 copyright liability would be approx-
imately $5 million.
This $5 million liability represents 0.76 percent of the CATV industry's esti-
mated 1975 basic service revenues of $660 million (based on 10,000,000 cable-sub-
scribing households paying an average monthly rate of $5.50, or $66 per year).
However, the extent of CATV copyright liability will increase sharply within the
next 10 years.
For example, two recent independent studies - of the CATV industry contain
significant growth projections.
One study projects 32 million subscribing households by 1984 ; the other pro-
jects 22 million CATV households by 1983.
Current CATV growth patterns would indicate that the projected growth of 22
million households is a conservative estimate ; the projected 32 million house-
holds is an optimistic estimate.^
Nevertheless, the two projections give extremes of a range of growth that are
helpful in assessing CATV's future copyright liabilities.
Assuming that by 1983-84, the same basic monthly subscriber fee assessed
today ($5.50) remaine<l stable: (1) 22 million cable-subscriber households would
produce annual revenues of $1.45 billion; and (2) 32 million households would
provide revenues of $2.11 billion.
Industry copyright liability, however, would not remain at 1975's 0.76 percent
of annual revenues.
Today, less than 200 cable systems serve 10,000 or more subscribers. Even so,
they would account for 76 percent of the 1975 liability of $5 million, with their
payments representing an average of 1.5 percent of annual revenues.
CATV's growth will come from existing large systems as they expand their sub-
scriber base, and from new major systems developed within the major metropoli-
tan market areas.
Because the.se larger systems will be paying copyright liability closer to the
high end of the graduated fee schedule, the average payment will certainly be at
least 1.5 percent of annual revenues if, indeed, not more.
Based on an average assessment of 1.5 percent of revenues, the CATV industry
at 22 million subscribers in 1983 would be paying $21.8 million in copyright liabil-
ity (more than 300 percent above today's $5 liability, with .sliglitly more
tlian a 100 percent increase in total subscribers).
At 32 million subscribers in 1984. the industrj' would be paying $31.7 million in
copyright liability (more than 500 percent above today's $5 million liability, with
slightly more than a 200 percent increase in total subscribers).
XCTA believes therefore, that Congress must in its consideration of copyright
take full note of these CATV industry growth patterns and their impact on future
liability.
PROGRAMMING PRACTICES — NETWORK AND SYNDICATION
During the hearings a number of questions were asked about the practices of
networks in obtaining product from program producers and tlie leasing of pro-
gramming to television statiours on a city by city basis ( syndication )<Of particular
concern were the methods for determining the value of a product during negotia-
tions, the relationship of such factors as the product itself, the market and exclu-
sivity arrangements in arriving at fair compensation, and of course, the effect
CATV carriage has on the value of a particular product and how that effect
2 "CATV Networks and Pay-TV : Feasibility and Prospects." Knowledge Industry
Publications. Inc.. New York. New York. 1975. , ,, , ^ „ . „ , xr«„, v,,,t tnj«to
3 "CATV " Frost and Sullivan (Technological Market Research firm), New iork, New
York. 1975.'
e
514
enters into marketplace detemination of the value of the product and the sale
of advertising. The following material provided by a major syndioator and sup-
plier of network programming, contains pertinent information about those
matters.
Network Programming {Comm,ercial)
(1) Definition
Network programming is television programming broadcast on one of the three
commercial U.S. television networks on a national inter-connected basis. Most
contracts between program suppliers and the three networks carry an exclusivity
clause granting the network the exclusive right to broadcast the programming
for a stated period of time. This exclusivity commonly prohibits the supplier from
licensing the programs to the other television networks or to any television sta-
tions or CATV systems in the exclusivity area, which is usually the U.S., its ter-
ritories and possessions, and English-language Puerto Rico. There are occasional
minor variations among the networks as to the exclusivity area (e.g., to include
Bermuda or Tijuana, Mexico) .
(2) Types of Programming
(A) Prime Time— {7 :00 p.m. to 11 :00 p.m., except Central and Mountain time
zones : 6 :00 p.m. to 10 :00 p.m. )
In prime time the most common types of programming are half -hour and one-
hour series. In addition, the networks program theatrical feature films, made-for-
television feature films, entertainment specials, news and some public affairs doc-
umentaries and specials and some sports events in prime time.
(B) Day-time Monday-Friday Programming. — The great majority of program-
ming in this time period on the networks consist of game shows, quiz shows, talk
shows and soap operas.
(C) Saturday Morning Programming. — Most programming on Saturday morn-
ing on the networks is children's programming, a considerable portion of which is
in animation.
(D) Late Evening. — Each of the three networks takes a different approach to
late evening programming (post-prime time). One network programs talk shows,
another programs feature films and the third programs a mixture of various
types of programming ranging from variety specials to dramatic shows produced
especially for that time period.
Most of the programming referred to in (A) through (D) above (except for
sports, news and public affairs) is supplied to the networks by outside producers
and suppliers. In addition, the networks themselves produce and broadcast news
and public affairs programming and additional sports programming at various
times during the week, with special emphasis on news and public events and
sports on Saturday and Sunday afternoon as well as early evening news shows
during each weekday.
(3) The program suppliers
As indicated above, most of the entertainment programming broadcast by the
three national commercial networks are supplied by entities unafiiliated with the
networks. These are primarily the major motion picture companies and inde-
pendent producers. The networks in whole or in part finance the development of
this programming by financing the cost of stories, outlines, scripts, pilot films
and the like. In exchange for financing the various steps of development, the net-
work receives an exclusive option to license the financed program or programs at
agreed-upon license fees. In the case of television series, the network options can
continue for from five to seven years of product.
(4) Compensation
As indicated above, the program suppliers are compensated by the networks for
the programming they supply. The networks also compensate the individual sta-
tions across the country which carry the network programming in accordance
with aflSliation agreements which exist between each network and its aflBliate
stations. In addition, the stations sell local advertisers commercial time adjacent
to network programming, which, because of the larger audiences generated by
network programming, commands higher pricas than other local time. The net-
works receive their compensation from national advertisers who purchase adver-
tising time on the networks.
Syndication
(1) Definition
Television syndication is the leasing of programming to individual stations on
a city by city basis. Most contracts carry an exclusivity clause covering 35 miles
515
from the city of license prohibiting other television stations or CATV systems
from using the same material. The product is composed mainly of the following :
1. Specials. — Usually first-run entertainment or documentary material with two
telecasts over a year's term.
2. First-Run Series. — Primarily half -hours with 26 to 39 originals and sufficient
repeats to fill out a 52-week telecast schedule on a once-a-week basis (i.e., 26 & 26
as in Ozzie's Girls, or 39 & 13 as in Price Is Right). Some strip programming is
oflfered (What's My Line, Truth Or Consequences) running five a week with 195
new shows and 65 repeats being typical. Another major form is the talk/variety
shows such as Mike Douglas, Merv Griffin and Dinah Shore. Because of the
nature of the program content, very few repeats are produced. First-run con-
tracts are usually for a one-year period of time.
3. Off-Nctivork. — Those series which achieve network success and build up at
least four years of production are valuable to the syndicated market. They are
usually half-hour (Hogan's Heroes, I Love Lucy, Adam-12) or hour (Perry
Mason, Ironside, Marcus Welby) in length. Contracts run anywhere from two
runs to unlimited runs with six typical. Usual contract terms cover five to seven
years.
4. Catalog Product. — ^This is older series product, mostly off-network, that is
sold for a short duration (Honeymooners, Have Gun Will Travel). Usually one or
two runs with contract term of one to two years in selective markets.
5. Feature Films. — Common trend is to sell the networks first and syndicate
post network. Most popular packages carry 20 to 30 pictures and terms are five to
seven years with five to ten runs of each feature. Older features recycled are re-
placed with the better titles continuing television exposure and the poorer titles
going on the shelf.
{B) Station scheduling of syndicated product
1. Affiliates. — Most affiliate stations (ABC, CBS, NBC) in the eastern time zone
have the following local time periods to fill :
9 :00 am to 10 :00 am.
1:00 pm to 1:30 pm.
4 :30 pm to 8 :00 pm. (with the exception of network news) .
11 :00 pm to 11 :30 pm.
1 :00 am to signoff.
Local and network news usually fill the 6 :00-7 :30 pm time period and the
11 :00-ll :30 pm time period. Features are used afternoon and late night week-
ends, preemptions in prime time and as flve-a-week early shows which are on a
decline.
The most valuable part of the day for the syndicator is 7 :30-8 :00 p.m. for first-
run once-a-week programming. The second most valuable part is 4 :30-6 :00 p.m.
with talk/variety shows, off-network syndication and feature films taking time
in that order.
2. Independent Stations. — Independents have a poorer circulation in the day-
time and do not pay much for this area. It's primarily used for the multiple run
feature films and live local shows. Since most affiliates attract an older audience
with their talk/variety and news programming in late afternoon and evening
(4 :00-8 :00pm), indies basically target their counterprogramming to the kidult
audience. This material is primarily off-network series (I Love Lncv, Star Trek,
Wild Wild West. Andy Griffith, Flintstones, Gilligan's Island). The 8:00-11:00
pm time period is comprised of ninety minute talk/variety shows, feature films,
sports and off-network series. Most all Monday to Friday programming is
"stripped" (same series each day in time period).
(C) Price Negotiations
Most rate cards are set on the philosophy that the biggest markets with the
most circulation pay the biggest prices (New York) and the smaller markets pay
a much smaller price proportionately (Zanesville, Ohio). This is tempered by
historical price patterns and artistic merit of new program offerings (Mary
Tyler Moore would be more desirable than the Doris Day series and thus sell
for much higher dollars). Supply and demand, plus the skill of the negotiator, play
a large part in arriving at a final price in each market.
(D) Station Income
The United States advertising-supported stations' basic goal is to attract a
huge audience through the proper selection of programming. This audience is
subsequently "priced" and resold to advertisers primarily through their advertis-
ing agencies. Value would be shown through the use of rating research material.
516
To illustrate, each rating point represents 1% of the total market households.
Therefore, in a million household market, a one rating would mean 10,000 homes.
Ten rating points would thus achieve an audience size of 100,000 homes. Hypo-
thetically, a ten rating would be worth $250 per 30 second spot. If the station
could change its programming and increase the rating from a ten to a fifteen, it
would automatically increase its price per spot by 50% making it worth $375.
It obviously leads to the conclusion that successful programming is worth more
money in net profits even though its cost might be higher than less effective
programming.
CATV is measured by the rating services in any county where there are over
10% cable homes. Since this viewing is listed in the research books, the station
is getting credit and charges his rates accordingly. There is no separate breakout
of CATV systems in the books.
INFRINGEMENT OF COPYRIGHT
Section 501 deals with infringement of copyright. Subsection (b) thereof
entitles the copyright holder to initiate action for any infringement of his copy-
right. That is as it should be. However, subsection (c) grants a television broad-
cast station rights as a legal or beneficial owner of copyright in the programs it
transmits for purposes of instituting action for infringement against cable tele-
vision systems. The rights to most television programs are held not by an individ-
ual broadcaster, but by a syndicator or other program owner. They are fully pro-
tected by subsection (b). In those cases where a television station does hold the
copyright, it has every right to sue for infringement under subsection (b), too.
Subsection (c) would grant to hundreds of broadcasters the ability to institute
harassing suits against cable operators for minor or even inadvertent violations
of FCC rules. This creation of private attorneys-general is unprecedented in copy-
right law and should be stricken from the bill. Infringement of copyright is fully
actionable under Section 501 (b), and adequate remedies for violations of FCC
regulations are available to broadcasters under the Communications Act.
More specifically, under the FCC's rules cable television systems are permitted
to carry both "local" and "distant" television signals. Under certain circumstances
the rules also require these systems to delete or black out certain programs from
the distant signal. These exclusivity rules are based on unfair competition and
copyright related concepts. Because the rules are quite complex, a cable system
even in good faith sometimes fails to delete a program which should have been
deleted. Causes for this include inadequate program schedule notices, last
minute schedule changes by either the distant or local station, equipment mal-
functions, power outages and program overruns. Furthermore, given the small
size of most cable television operations and the vast number of programs involved
(the average CATV system carries over 0 television broadcast stations), unin-
tentional errors can and do occur. It can thus be seen that there will be many
instances where under the terms of Section 111, the cable system would be guilty
of prima facie copyright infringement. The FCC has remedies for the willful
and repeated violations of these rules by cable system operators. These remedies
include cease and desist orders and revocation of operating authority. In addition,
the FCC has asked Congress to include cable systems in the section of the
Communications Act dealing with forfeitures. Thus adequate remedies are avail-
able without resorting to copyright ii^iringment suits in the courts. Section 501
(c) should therefore be deleted.
517
CABLE TELEVISION
UNDER THE 1972 FCC RULES
AND THE IMPACT OF ALTERNATIVE COPYRIGHT FEE PROPOSALS
AN ECONOMIC ANALYSIS
by
BRIDGER M. MITCHELL
in
Association With
ROBERT H. SMILEY
b, ■ .ati 1U;9
518
INTRODUCTION
Final rules of the Federal Communications Commission
governing cable television service in the 100 largest television
markets went into effect March 31, 1972, following six years of
FCC proosedings during which development of CATV service in major
cities has been effectively blocked by interim regulations pro-
hibiting the importation of distant television signals. The
rules as effective allow limited importation to occur, varying
with the size of the market and the locally-receivable signals,
but at the same time provide broad "exclusivity" protection to
local stations for their programs, thus requiring cable systems
to delete programs from the imported signals.
No provision for payment of fees by cable systems to the
copyright owners of television broadcast programming shown on
those systems is included in the FCC rules, and under the
Fortnightlyi' decision cable systems are not liable for copyright.
Nevertheless, the Commission anticipates congressional legislation
to require copyright payments and would regard its enactment as a
reaffirmation of the FCC 's regulatory program toward cable tele-
vision.
1/ Fortnightly Corporation v. United Artists, 392 U. S. 390 (1968)
519
This study assesses the profitability nf cable television
in the major markets under the final FCC rules and determines
the impact of alternative copyright fee schedules which have been
proposed. Our research builds on the computer simulation method
and detailed cost and revenue data developed by Comanor and Mitchell
in their published study of the impact of the FCC rules as pro-
posed in July 1970. We have considerably modified and expanded
their work to include the following:
. . . .the March 1972 FCC rules
. . . .more accurate and detailed predictions of penetration
in major markets
. . . .the effect of the exclusivity provisions on penetration
... .a comprehensive set of cable system parameters encom-
passing market type, available signals, system location
and subscriber and construction characteristics
... .four alternative copyright fee schedules (including
no fees)
In outline, the analysis of CATV profitability focuses on a
number of market and system characteristics which can be identified
as typical or representative of a cable system if it were to be
constructed under current rules. By varying the characteristics
(e.g., system size, or lineup of local signals, or housing density)
over a comprehensive set of characteristics, the outlook for cable
in nearly all parts of the major markets can be assessed. In this
520
analysis, costs and prices have been measured in 1970 values;
costs, revenues and rates of return are consequently in "real"
terms. Except for rules changes since July 1970, cost figures
are based on Comanor and Mitchell's detailed report. Throughout
this study when discussing the size of a cable system we refer
to the number of subscribers in its fifth year of operation, at
which point it has virtually achieved its final size.
Our analysis includes revenues from subscribers, determined
by penetration rates dependent on local and distant signals
carried, and a realistic amount from advertising on a local origi-
nation channel. No revenues or costs have been attributed to the
development of leased channels.
All systems considered in this study are newly constructed.
The effect of potential copyright fees on existing systems in
comparable market circumstances would be somewhat different only
in the short run. For several years, these already-built systems
would experience reduced profitability and the systems' owners
would earn lower returns than they had anticipated. At the same
time, revenues would still exceed operating costs, so that the
original systems would not actually go out of business. But
subsequently, when the systems required rebuilding, the copyright
fees could make reconstruction unprofitable, since nearly the same
investment considerations apply either to rebuilding an existing
system or to constructing the same system in a similar but unwired
community.
521
MARKET CATEGORIES AND SYSTEM LOCATION
In examining the probable effect of various provisions for
payment of copyright fees we will consider separately the
characteristics of typical cable systems in four types of markets:
the top 50 markets, markets ranked 51-100, markets below 100,
and areas located outside television markets. The FCC rules permit
different signal carriage in each of these situations, and impose
differential requirements affecting system costs. In addition, the
density of housing, the prevalence of underground utilities and the
level of family income also varies by market size, A tabular
summary of these major market characteristics is set forth in
Table 1.
As R. E. Park's econometric findings 2/ strongly demonstrate, the
location within the market is also of fundamental importance to
determining penetration levels. For this study we therefore sul
divide each of the markets 1-50, 51-100, and 100+ into typical
"middle market" and "edge market" systems. Middle market
locations are close to off-the-air signals, while edge market
systems are approximately half-way between the transmitter and the
B-contour limit of the local signals. (The forth category, an
"outside market" system, is necessarily at or beyond the location
of a typical edge market system.) Thus the typical systems to be
analyzed fall into one of seven boxes in the following matrix:
2/ "Prospects for Cable in the 100 Largest Television Markets"
57-786 O- 76 - pt. 1 - 34
522
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X. Market
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Within each box, indicating a specific market type/system
location, we further consider the two or three most likely lineups
of available local signals. While we have not reported every
combination which can occur, the cases tabulated are representative
of the majority of signal patterns to be encountered and they
cover a degree of variation sufficient to include most other
possibilities.
524
CABLE PENETRATION
At the time Comanor and Mitchell's research was under-
taken virtually no reliable statistical information was available
to quantify the effects on cable penetration of the number, types
and quality of local signals available, the additional cable
signals provided, the price of cable service and the incomes of
potential subscribers. That study provided estimates of most of
these variables by use of multiple regression analysis on a randomly
selected sample of 149 systems drawn from the Television Factbook.
The authors noted that these systems were largely outside of
the top 100 markets or in areas of quite poor reception, or both.
Projection of penetration in the major markets under the then-
proposed FCC rules (allowing four distant independent signals)
was recognized as subject to considerable error.
Since publication of the Comanor-Mitchell paper the measurement
of factors determining penetration has been advanced considerably
by Park in his study "Prospects for Cable in the 100 Largest
Television Markets." Park uses statistical techniques closely
related to those employed earlier. He improves on the Comanor-
Mitchell study in three major ways:
First, all 63 cable systems analyzed by Park had at least
three A-contour, good reception-quality signals available off-
the-air.
525
Second, all data were verified with system operators by
telephone interview, insuring greater accuracy than available
from only published sources.
Third, two improved measures of signal quality were incor-
porated into the analysis. Distance of the cable system from
each transmitter was explicitly included, and UHF signals were
measured separately to account for more rapid signal attenuation
with distance and the absence of UHF tuners in some households.
The complete penetration equation as estimated by Park
measures the effects of the following variables:
number of off-the-air VHP signals, with separate
categories for networks, duplicate networks, inde-
pendent, educational and foreign signals; by distance
from transmitter
number of off-the-air UHF signals, by the same
categories; by distance from transmitter; with
measurement of UHF set penetration
number of cable signals, by the same categories
color set penetration
annual subscriber price
annual family income
Park's research is particularly appropriate to the present
assessment of the effect of alternative copyright fee schedules
on the viability of cable systems in the major markets. In pro-
jecting penetration rates for the systems studied here the average
figure predicted by Park's equation has generally been used, since
526
this represents the central experience to be expected in the
major markets. In addition, a selected number of intermediate
sized systems have been analyzed using penetration rated 33%
greater than predicted on average. Such increased penetration
is definitely atypical, and would be expected to occur in only
about one out of ten market situations, because of factors not
fully accounted for in the penetration equation.
527
DENSITY
Density, the number of homes per cable mile, can vary
considerably from one potential franchise area to another.
Comanor and Mitchell reported an average density of 95 within
major markets, and 79 outside, in their sample of Factbook
systems. More recently available data for a number of munici-
palities in the Dayton, Ohio and Boston, Massachusetts areas are
tabulated in the appendix. For systems in this study we have
assumed somewhat higher densities than considered by Comanor-
Mitchell, ranging from 80 homes per mile outside of television
markets up to 200 homes per mile with 20% of plant underground
in the central areas of markets 1-50.
In practice, of course, both higher and lower densities
will be encountered. But the tendency to a substantially higher
figure for any important number of similar systems is unlikely
in view of the FCC's emphasis that it will not authorize carriage
of broadcast signals by systems which do not serve all parts of
the community. 2/
3/ Federal Register, p. 3276, §180
528
THE EFFECT OF THE EXCLUSIVITY RULES
The new FCC rules require cable operators to "black-out"
numerous classes of programs on imported signals when those
programs are also shown by a local station. The degree of pro-
tection provided varies with the type of programming and may
extend up to two years. For our purposes the primary effect of
these rules is to reduce the attractiveness of distant signals to
subscribers and thus reduce cable penetration. Aside from pro-
viding for one channel-switching device for each imported signal,
we have not allowed any additional costs of performing the blacking-
out function itself, keeping records, etc.
At this writing, evidence on the magnitude of the exclusivity
effect is limited to a preliminary study by R. E. Park, "The
Exclusivity Provisions of the Federal Communications Commission's
Cable Television Regulations." From detailed program listings for
four stations two networks and two independents plus partial
listings for ten other stations. Park synthesizes the expected
proportion of a broadcast week that a distant signal would be
blacked out. A portion of his findings are reproduced in Table 2.
Park's results indicate, for example, that in those top 50
markets in which local service provides three networks and one
independent, the cable system importing two additional independents
will be required to black them out about 39% of the time. If it
imports a third independent (on a stand-by basis, since the rules
529
TABLE 2
PERCENTAGE OF TIME DISTANT SIGNAL CHANNELS ARE BLACKED-OUT
LOCAL SIGNALS
Markets 1-50
Number of
Distant Signals
Allowed
Number of Distant
Stations From Which
to Choose
2 3 4 5 6
3 network +
2 independent
2
51%
35%
26%
20%
16%
3 network +
1 independent
2
3 9%
24%
15
11
8
3 network
3
52
16%
2 7%
15
9
6
Markets 51 - 100
3 networks
2
6
2
1
0
Source: R.E. Park, "The Exclusivity Provisions of the Federal
Communications Commission's Cable Television Regulations,"
Table 2, p. 5.
530
allow only two distant signals at any moment on the cable) and
"fills in the blanks" where possible it can reduce the blacked-
out time to about 24%. Importing a fourth independent further
reduces this to 15%, etc. The boxed-in figures represent the
expected effect when no stand-by signals are imported.
The impact of the exclusivity rules on subscriber penetration
is likely to be at least as great as the reduction in viewing
hours. Programs receiving protection will be predominantly those
with large audiences, many of whom would value an earlier or
alternative viewing date or time which cable could otherwise
provide. Nevertheless, lacking data to refine an estimate of this
effect, we assume that exclusivity protection is equivalent in
its impact on penetration to a proportionate reduction in the
number of full-time distant independents carried on the cable,
using the appropriate boxed figures from Table 2.
Will it be profitable for a cable system import stand-by
independent signals? The costs of additional imports will rise
as the CATV system must go further to find each additional inde-
pendent. Concurrently, the proportion of time that can be filled
in with each extra signal is declining. The exclusivity rules
thus place the cable firm in a situation of sharply diminishing
returns as regards additional penetration from distant signals.
Generally, the answer will be "no. " Exceptions may occur where the
531
stand-by independent has particularly attractive programming,
or when importation costs are less dependent on distance, as
could occur with satellite transmission.
Regarding importation costs, we have assumed for all systems
in this study that distant signals are delivered by cable
system-owned microwave links of 50-100 miles per channel
imported. Average distances to the first and second closest
independents (in the top 25 markets) are tabulated in the appen-
dix. These averages range from 91 to 208 miles to the closest
signal, and 125 to 325 miles for the next closest for several types
of markets. Thus the microwave cost estimates used here must be
considered generally low, although they may be closer approximations
for markets with several closely spaced systems which pool their
microwave facilities.
532
COPYRIGHT FEE SCHEDULES
In the analysis which follows we consider four alternative
fee schedules for payment by cable systems to copyright owners.
Schedule 1 is the baseline case of zero fees. Schedules 2 and
3 levy successively larger fees as the system's revenue grows.
Schedule 3 (incorporated in Bill S.644) begins at 1% of subscriber
revenues, and rises to 5% of revenues exceeding $640,000 annually;
Schedule 2 is exactly half of Schedule 3. For the fourth Schedule
we consider a flat fee of 16.5% of subscriber revenues, regardless
of the size of annual revenue. The exact details of these fees are
set forth below and in the accompanying figure 1.
Copyright Fee Annual Subscriber
Schedule No. Revenue
J^ 2 3 4
of 1st $160,000
of 2nd $160,000
of 3rd $160,000
of 4th $160,000
of remaining revenue
In comparing systems in different market circumstances and with
alternative fee schedules, we keep unchanged the subscriber price
as well as the system size and other attributes of the CATV service.
Cable television systems have some of the attributes of a "natural
monopoly, " flowing principally from their high fixed-low variable
0%
.5%
1%
16 . 5%
0%
1 . 0%
2%
16.5%
0%
1.5%
3%
16 . 5%
CfK,
2.0%
4%
16 . 5%
0%
2.5%
5%
16 . 5%
533
Figure I
Alternative Copyright Fee Schedules
yjk Fee as Percent
of Subscriber Revenues
16. 5'? ,
15°/
10'
5%
4%.-
3%..
2%.
0 . 5%
Schedule 4
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Schedule 1 = no fee
534
cost nature. But, in practice, the behavior of
c?ble systems is increasingly limited by local and federal reg-
ulation, and by competition among firms for franchises. Both of
these forces sharply restrict the ability of cable firms to adjust
price or output at will.
Present regulation and competition for new franchises, plus
the threat of more extensive regulatory action if firm behavior
is perceived as excessive, has kept monthly subscriber rates
virtually constant in current prices over several years. Seiden,
in 1970, found most recently franchised systems charging between
$5.00 and $7.00 per month. In their sample of Factbook systems
Comanor and Mitchell reported a mean price of $5.00 per month.
Park in 1972 has an annual average price of $63 for his sample of
A-contour cable systems. The assumption that moderate cost increases,
including copyright fees, cannot be passed on in the form of higher
prices is consistent with the recent market experience.
Assuming no price response by cable firms if a 16.5% surcharge
were imposed requires further discussion. Firms would doubtless
make strong representations to local authorities about the need for
higher prices, and bids for new franchises would quote higher
rates. But granting for the moment that regulators allowed part
or all of the surcharge to be translated into higher subscriber
rates, how would cable profits be affected?
535
The answer depends primarily on how rapidly penetration would
decline as prices were raised; in technical economic terms, on the
elasticity of demand. If, for example, a 16.5% increase in price,
from $5.00 per month to $5.83, results in a 16.5% decrease in pene-
tration, say from 30% to 25% of homes passed, then the higher price
has (approximately) 4/ no effect on total subscriber revenue--it is
fully offset by reduced demand for service.
A basic result of economic theory states that consumers ' demand
for a service will be increasingly sensitive to its price as more
and closer substitutes are available for that service. Thus house-
holds in areas with a diversity of broadcast signals, with generally
clear reception and with a variety of entertainment alternatives ca ■
be expected to decline service rapidly as prices rise. This
availability of good substitutes for CATV describes most top 100
markets. The econometric work of R.E. Park confirms this degree
of price elasticity of demand in such areas; in fact, the figures
in the example above correspond almost exactly to Park's statistical
findings . 5/ 5/
4/ Calculating the percentage changes, for convenience, in terms
of the original price and penetration, results in a slight
approximation. A more exact result is obtained using the
average of the old and new price and penetration.
_5/ Park, "Prospects for Cable...", p. 140.
6/ For a discussion of the effect of demand elasticity on maximum
rates permitted by a regulatory authority, see Comaner and
Mitchell, "The Costs of Planning: The FCC and Cable Television
536
How, then would cable systems' profits be affected by a 16.5%
copyright payment and a concommitant rise in subscriber rates?
Revenues would be unchanged, while operating costs would increase
sharply by the amount of the copyright payments. There would
be some small offsetting changes in other incremental costs,
resulting from the saving achieved by not serving the subscribers who
do not purchase service at the higher price. For typical systems,
there are rather small costs of installing additional drop lines,
additional maintenance and billing expenses and slightly higher
taxes and dues related to numbers of subscribers.
In consequence, the net effect of allowing higher subscriber
rates in conjunction with 16.5% copyright fee payments would be to
reduce rates of return to nearly the same levels as would be
achieved by holding subscriber rates unchanged with the same 16.5%
copyright fees. In addition, penetration would be lower, providing
a narrower base for future leased-channel services capable of
generating additional payments from cable systems to program suppliers.
We remind the reader that the discussion in the preceeding
several paragraphs assumed a degree of upward price adjustment which
has not been observed. In the remainder of this study we adhere
to a fixed monthly price of $5.00 7/ for maximum cable broadcast
service allowed by the FCC rules. 8/
7/ Plus $1.00 for second television sets in 20% of households.
8/ One other reminder may be in order. Since we are considering all
prices and costs in 1972 terms, increases in the monthly
subscription rate at about the rate of increase of consumer
prices generally will not contradict our observation that real
subscription rates cannot be adjusted.
537
An analysis of the profitability of systems under the alternative
assumption of higher rates and consequently reduced penetration
would yield approximately the same findings.
57-786 O - 76 - pt. 1 - 35
538
MEASUREMENT OF CABLE SYSTEM PROFITABILITY
To summarize the profitability of the typical cable systems
of this study we will calculate the (pre-tax) financial rate of
return on total capital invested in each system. The financial
(or internal) rate of return9/is the single comprehensive measure
of investment in a cable system. Unlike ratio measures for a
particular year (e.g. net revenues divided by total capital) it
correctly recognizes the opportunity cost of front-end financing,
i.e. that several years are required before systems achieve full
penetration, during which time invested funds are needed. Using
the financial rate of return permits us to compare the profitabil-
ity of funds invested in CATV systems with other types of invest-
ments, and thus the likelihood of cable systems being constructed.
The rate of return required to induce investment in a cable
system will depend on the proportion of total capital which can be
obtained through debt instruments and the associated borrowing
rates, and the minimum return demanded by equity investors. Be-
cause the cable industry more closely resembles a high-risk growth
industry than a public utility, at least at the present time, both
lenders and investors demand higher rates of return than for
seasoned investments.
0/ The internal rate of return is that discount rate which equates
the present value of revenues and costs over the lifetime of
the system. For further discussion, see Comanor and Mitchell,
"Cable Television and the impact of Regulation," p. 184.
539
For this study we have held both revenues and cost at 1970
price levels over the full life of the cable system. Financial
measures are consequertLy in real (constant dollar) terms. The
corresponding rate of return concept is the financial return
which would occur if prices did not rise throughout the economy;
whereas in an inflationary period, investors expect price increases
and demand higher returns in money terms to compensate them for
the otherwise reduced value of their funds when their investment
is recovered. Thus if investors expect a 4% rate of inflation
to continue indefinitely and will invest in enterprises comparable
to cable television only when they return 15% on average, the
required rate of return in constant prices would be 11%.
A detailed investment survey 10/ of the CATV industry in late
1971 reports that mature cable companies with demonstrated earnings
have found long-term credit expensive, and that institutional
investors are looking for a 15% return as a combination of interest
and equity appreciation. As a standard of minimum profitability
necessary to generate investment in new cable systems, we will use
a 10% constant-dollar financial rate of return on total capital.
This is on the low side of recent financing experience of established
CATV companies, and would therefore apply to new systems constructed
by the larger multiple system owners today. New CATV firms lacking a
10/ Halle & Stieglitz, Inc., "The Cable Television Industry.
540
track record will face higher costs of capital and will require
somehwat higher rates of return to justify their construction.
541
RESULTS — AN EXAMPLE
We are now prepared to analyze the financial results for typical
systems in the several market situations discussed earlier. For
each system, the computer simulates the complete revenue and cost
experience to be expected, using the parameters supplied by the
analyst. The detailed cost and revenue schedules have been built
into the Comanor -Mitchell computer program, modified to include
the changes in FCC rules, penetration and costs discussed earlier
and in the appendix of this study.
As an example, consider the abstract of the computer output
reproduced in Table 3 . Part A indicates that this example is
representative of a 25,000 subscriber system located near the middle
of a top 50 raerket. Density is assumed to be 200 homes per mile, and
family income $12,200. Annual subscriber rates are $62.40, correspond-
ing to $5.00 per month plus a small additional amount for second
sets. Since this is a central urban location, 20% of the cable
miles are underground, and standard local origination equipment
has been budgeted. Revenue from advertising on the cablecasting
channel has been estimated at $2.20 per subscriber annually. The
table of signals carried shows that 3 VHP networks plus one viewing-
test network are available off-the-air. In addition there is one
UHF independent and a VHF educational station. In addition to these
broadcast signals, the cable system imports two independents and
542
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544
one educational station. These signals are imported by microwave,
averging 3 hops of 35 miles each per channel.
Within five years the system is assumed to reach maturity, apart
from further growth due to rising incomes or enlargement of its
franchise area. Penetration is predicted to be 28.1% if the distant
signals are fully available, but 27.2% as a result of exclusivity
protection on the independent channels.
Part B summarizes the growth of penetration, subscribers,
and system revenue (including advertising) over the first 10
years.
In Part C we may assess the impact of copyright fees on pro-
fitability. For each of the four fee schedules described earlier
we report two rates of return — one assuming a 10 year average life-
time of capital, the second assuming 15 years. If fixed capital
equipment is replaced about every 15 years, this system will earn
a 10.4% real rate of return on total invested capital absent any
copyright fees. Alternatively, the statutory schedule (number 3)
reduces the rate of return to 9.3%, and the flat 16.5% fee lowers
returns sharply to 5.5%. A shorter lifetime for equipment reduces
these returns by 2.5 to 3 percentage points.
In the analysis below we report rates of returns based only
on 15-year lifetimes. Fifteen years represents a compromise be-
tween somewhat longer physical lifetimes for some parts of the cable
p'lant and rather shorter economic lifetimes of currently operating
systems experiencing technological obsolescence. It appears
545
unlikely that 20-channel systems built today will remain competitive
beyond 1985 without major rebuilding.
546
RESULTS — IN DETAIL
The financial prospects for cable under the final FCC rules
and the impact of alternative copyright fee schedules are contained
in the seven tables which follow. While we shall briefly review
the major findings here, the reader should consult the tabulations
for particulars. Tables 4 and 5 report the expected experience in
middle markets of large and intermediate sized systems respectively.
Line 1 of Table 4 restates the example system discussed in
detail above. Lines 2 and 3 are for similarly situated communities
with somewhat different sets of local signals. Penetration ranges
from about 22-27% and rates of return from 7.5 to 10.4% when there
are no copyright fees. Despite somewhat higher penetration rates,
systems in the second 50 middle markets earn lower returns, princi-
pally because of reduced density, while in the lowest ranked mar-
kets there is great variation, with profitable, 55% penetration
systems when one. network is missing from the local signals.
Intermediate-sized systems in middle markets are decidedly
below the 10% rate of return needed to attract investment funds.
Except where quite large systems of 2 5,000 or more subscribers
can be built, central city areas of the major markets are not bright
prospects for cable under present rules, even without copyright
payments .
547
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The prospects for large systems at the edge of major markets
(Table 6) are brighter. In the top 50 markets penetration is in the
34-38% range with rates of return 11.0-12.6%. In the second 50
markets penetration ranges up to 45% with rates of return from 9.7-
13.4%. In the smaller markets and also the fringe (outside) areas
we find more heterogeneous results, with quite profitable CATV
possibilities where fewer than three networks are available.
The corresponding intermediate-sized edge systems are again
unprofitable in all 3 network cases. This indication of the im-
portance of large systems, or economics of scale in technical
terras, is developed in more detail in Table 8, by systematically
varying the size of the most profitable system from each of the
four market types in Tables 4-7. While large systems would seem
feasible in the major metropolitan areas, as of March 1971 only
20 systems had more than 20,000 subscribers and the largest had
less than 50,000 jJ/.Some fraction of these economies of scale can
be achieved when a series of smaller systems are under common
ownership and thereby realize savings from efficient use of
management and technical personnel and can share local programming and
and signal importation expenses.
The results presented in tables 4-8 are based on market, economic
and construction factors which typify the most common situations
which will be encountered in middle and edge locations of each of
the four types of markets. Of course, within each category there
will be a degree of variation, clustered around the typical situa-
11/ Television Digest, CATV and Station Coverage Atlas.
550
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554
tions we have reported. Some communities will have higher incomes,
others will require extensive undergrounding, still others will
require high-cost local origination facilities, etc.
To measure the sensitivity of our findings for typical systems
to such variations, we have rerun all of the intermediate-sized
systems (tables 5 and 7 ) assuming that penetration is one-third
greater than would be expected on average, for each set of market
characteristics. A variety of unmeasured factors can cause actual
penetration to vary above or below the average value predicted by
the penetration equation. In increasing the average value by one-
third we have in effect selected only the 10% of the cases in which
penetration is most favorable; in other words, nine out of 10 com-
munities having the same signal lineups, income, etc. will have
lower penetration.
Turning to the results in Tables 9 and 10 we find that such
unusually high penetration is sufficient to produce at least one
profitable system in each type of market, at least if copyright
fees are absent. Thus, 7,500-10,000 subscriber systems have some
chance of earning a going rate of return in the top 100 markets
only when local circumstances produce unusually favorable penetration.
We turn finally to the financial prospects for cable when
copyright fees are required. The predominant effect of Schedule
3, the statutory fees proposed in S.644, is to reduce the financial
rate of return on total capital a full percentage point for profitable
555
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557
and near-profitable systems, and by somewhat less for systems well
below the 10% return level. Thus, in the example system (the first
line of Table 4) the rate of return falls from 10.4 to 9.3%.
A one-point change in the rate of return on total capital has a
considerably larger effect on equity holders. Suppose that one-half
to two-thirds of the cable system is financed by 8% 12/ debt instruments.
Because of leverage, a 10% return on total capital will then corres-
pond to a return on equity up to 13% or 14%. In consequence, a
decline to a 9% return on total capital can reduce the return on
equity by two to three percentage points, depending on the capital
structure of the system. Changes of this magnitude are more than
sufficient to postpone or eliminate construction of cable systems
which otherwise appear marginally profitable.
The preponderance of evidence in Tables 4-10 is that large
systems at the edges of top 100 markets will earn a 10-13% rate of
return before copyright payments, large systems in middle markets are
not likely to exceed 10%, and intermediate and smaller-sized systems
will be marginally profitable only where special factors operate.
Copyright fees at the level of Schedule 3, would significantly slow
the rate of growth of cable in the major markets, particularly in
middle areas with good quality signals and in edge market communities
of intermediate size.
12/ In an inflationary period borrowing costs would be higher by
approximately the expected rate of inflation.
558
Copyright fee schedule number 2 is exactly one-half the rate
of schedule 3, As expected, it has approximately half the effect
of schedule 3 in reducing the rate of return for all systems.
Schedule 4 is the flat 16.5% copyright fee. Its effect on
rates of return is devasting. Of all variations studied in the top
100 markets, only a single system earns a 10% return--the 50,000
subscriber edge market 51 -100 system in Table 8 . Fee payments of
this magnitude would effectively halt cable growth in the large cities.
559
CONCLUSION
The outlook for early development of cable television service
in the major cities is at best mixad. As compared with the rules
discussed two years ago, the final FCC rules more tightly
restrict the choice of broadcast signals a system can provide to its
subscribers .
Analysis of the important variations in potential market and
cable systems characteristics in these urban areas demonstrates that
only the largest systems, or multiply-owned systems of slightly
smaller scale, will be viable in the central city areas where off-
the-air reception quality is high, and then only under favorable
construction and penetration conditions. At the edges of these
markets returns will be sufficient to attract investment in the largesv.-
scale systems, but systems of 10,000-15,000 will be profitable only
under especially favorable circumstances.
In an investment environment in which the majority of urban
households can be profitably wired for cable television service
only when atypically propitious cost and demand factors occur, to requlr*
more than quite limited copyright payments will significantly retard
or halt CATV expansion in the urban markets. The proposed statutory
fee schedule in S.644 (up to 5% of subscriber revenue) would
generally lower rates of return on total capital a full
percentage point for systems in the profitable range, and in
an important proportion of cases its leveraged effect on equity
investors would be sufficient to create unprofitable systems.
560
As expected, a fee schedule of one-half that in S.644
reduces rates of return on total capital about one-half a
percentage point. Fees of this magnitude would restrict
cable construction primarily in market circumstances where
returns are already limited for other reasons. In contrast,
a flat 16.5% copjyright payment would create a decidedly
unprofitable investment climate for cable television through-
out the top 100 markets, far outweighing the limited prospects
opened up by the 1972 FCC rules.
561
Bibliography
Comanor, William S. and Mitchell, Bridger M. , "Cable
Television and the Impact of Regulation," The Bell
Journal of Economics and Management Science, Vol. 2,
No. 1 (Spring, 1971), pp. 154-212.
Comanor, William S. and Mitchell, Bridger M., "The Lost
Generation: A Correction," Bell Journal of Economics
and Management Science, Vol. 2, (Autumn 1971), pp.
704-705.
Comanor, William S. and Mitchell, Bridger M., "The Costs
of Planning: The FCC and Cable Television," Journal
of Law and Economics, Vol XV (1), April, 1972, pp.
177-206.
Foundation 70, "Cable in Embryo: Economic Considerations for
Urban Franchising," Wellesley, Mass., processed,
September 1971.
Halle and Stieglitz, Inc., "The Cable Television Industry,"
October, 1971.
Johnson, Leland L., ejt a_l, "Cable Communications in the
Dayton Miami Valley: Basic Report," Rand Report
R-943-KK/FF, January 1972.
Mitchell , Bridger M. , "An Economic Analysis of the Ability
of CATV Systems in Top 100 Markets to Pay Copyright
Royalities, " Washington, D.C.. processed May 15, 1972.
Park, Rolla Edward, "Prospects for Cable in the 100 Largest
Television Markets," Bell Journal of Economics and Man-
agement Science, Vol. 3, No. 1, (Spring, 1972), pp.
130-150.
Park, Rolla Edward, "The Exclusivity Provisions of the
Federal Communications Commission's Cable Television
Regulations," Rand Corporation, R-1057-FF/MF, June 1972.
Seiden, M.H. and Associates, CATV Report, 1970.
562
Sloan Commission on Cable Communications, On the Cable;
The Television of Abundance. McGraw Hill, New York,
1971.
Weinberg, Gary, "Cost Analysis of CATV Components: Final
Report," RWC Report UR-170, June 1972, prepared for
the Office of Telecommunications Policy.
Federal Communications Commission, "Cable Television Ser-
vice: Cable Television Relay Service," Federal Register.
Vol. 37, No. 30., Part II, (Feb. 12, 1972), pp. 3252-
3341.
Federal Communications Commission, "Cable Television Ser-
vice: Reconsideration of Report and Order," Federal
Register. Vol 37, No. 136, Part II, ( July 14, 1972),
pp. 13848-13910
Television Digest, Inc., CATV and Station Coverage Atlas.
1971-1972. Washington, D.C..
Television Digest, Inc., Television Factbook, Services
Volume, Washington, D.C.
563
APPENDIX
564
Modified Costs and Revenues
Several cost items in the Comanor-Mitchell Report
have been modified for this study, either to take account
of the FCC rules as finally adopted or as a result of the
availability of more recent information. A brief summary
of those costs which were modified for all systems inves-
tigated in this report is presented below:
1. Local Franchise Tax. 5% of gross revenues annually.
2. FCC Fee. $35 initial fee plus $0.30 per subscriber
annually.
3. Channel switchers. One switcher included in capital
equipment costs for each imported signal.
4. Pole rent. All results reported here include pole
rent of $250 per aerial mile in top 100 markets,
$175 in other markets.
5. Local origination. We assume the Comanor-Mitchell
standard systems, with capital costs of $38,000 and
annual operating expenses of $4300, and for smaller
systems a minimum system, with capital costs of
$11,000 and operating expenses of $2500 per year for
live origination. All systems are assumed to provide
a time-and-weather channel.
6. Public service channels. The final FCC rules require
CATV systems to provide 3 non-broadcast channels for
non-commercial public access, educational access, and
government access respectively. The public access
channel is to be provided without charge, while the
other two channels will be free for five years. The
costs of meeting these provisions are taken to be an
additional 75% of the capital costs assumed for local
origination, plus $4875 per year for part-time tech-
nician salaries.
565
7. The previously proposed 5% "public dividend" tax
for support of non-commercial broadcasting has been
eliminated.
8. Rate of subscribers growth over time. Park's recent
research on cable penetration completed after the
publication of the Comanor-Mitchell Report, indicates
a more rapid maturation of cable growth than was pre-
viously assumed. While the precise growth path has
not been definitively established, for this study we
have increased the rate of subscriber growth so that
the typical system reaches its mature size in the fifth
year. Thereafter, some additional growth occurs as real
incomes of potential subscribers are assumed to rise
at a rate of 2% per year.
As compared with Comanor-Mitchell, the effect of these
modifications is to increase the size of typical systems
in two ways :
a) study systems gain subscribers more rapidly in
early years ;
b) the size of a study system is measured in its fifth
year, rather than its size after twelve to fifteen
years .
Figure Al provides a graphical comparison of the growth
curve used for this study and the earlier Comanor-
Mitchell study.
As in the Comanor-Mitchell Report, financial (internal)
rates of return are calculated for a firm of indefinite life
by assuming that the firm reaches an equilibrium of revenues
and costs after one 15-year lifetime, or generation, of equip-
ment. Thereafter, the plant is rebuilt periodically, while
subscriber penetration is held constant at the mature level.
The rate of return is generally robust with respect to exact
assumptions about conditions in later generations. Another
solution to this terminal value problem is to assign the firm
a value at the end of its first generation, based on operating
characteristics such as revenues, subscribers, etc. For an
example of this method see L. L. Johnson, "Cable Communications
in the Dayton Miami Valley: Basic Report."
566
0)
u
3
EH
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t N.
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ciij 1128
%
567
The Penetration Equation
Technical details of the penetration equation are
summarized below. For further discussion see R. E. Park,
"Prospects for Cable in the 100 Largest Television Markets."
log ( ^^^ — ) = -8.159 + 3.098 log X^ + 0.290 log Xp
+0.212 log Xi + 0.2 98 log Xg - 0.540 log Xp
-1.473 log P + 1.398 log Y + 0.523 log C
where
1 + W.
X- = ^
1 + 0.731U ^(l-d^-^) 1/^-^ +5:{l-dl-6)Vl.6
Ui Vi
i = N = network
D = duplicating network
I = independent
E = educational
F = foreign
W- = number of cable signals of type i
U- = number of B-contour off-air OHF signals of type i
V^ = number of B-contour off-air VHF signals of type i
Pen= penetration = subscribers/households passed by cable
P = annual price
Y = median family income
C = color set penetration
u = UHF set penetration
568
In order to use Park's estimated equation to predict
penetration for the typical systems investigated in this
report, representative values must be assigned to the
variables of the equation. The following values are employed
in all of the simulations:
P = $62.40, corresponding to the $5 per month plus $1
per month for 20% of subscribers as a charge for
second set.
C = 50%. The effect of varying color set penetration
is not estimated with sufficient precision to incor-
porate variations in color set ownership across dif-
ferent types of markets .
u = 80% if 0 local network UHF signals
90% if 1 local network UHF signal
95% if 2 local network UHF signals
99% if 3 local network UHF signals
F = 0. Foreign stations are not included among the
signals carried by study systems.
In simulating cable systems for this study, we consider
systems located in the central area of a television market,
where off-the-air signal quality is generally high, and out-
lying areas of the same market, where quality is diminished.
In tie penetration equation the distance variable d is a measure
of the reduction in quality. A d value of 0 corresponds to a
viewer in the center of the market, while a value of 1 rep-
resents a viewer at the B-contour of the off-the-air signal.
For the systems in this study we have used the following
values :
In middle markets:
d = 0 for local stations
d = 1 for viewing-test stations
In edge markets:
d = 0.5 for local stations
d = 0.75 for viewing-test stations
569
Tables 9 and 10, "Ten Percent Most Favorable Penetration
conditions," are calculated using 133% of the penetration
implied by Park's equation above. This corresponds approxi-
mately to the penetration value at the upper 10% confidence
limit.
57-786 O- 76 - pt. 1 - 37
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580
Appendix C
The Effect of the FCC ' s Syndicated
Program Exclusivity Regulations
On Cable Television Systems
Under the FCC ' s 1972 Cable Television Regulations,
cable television systems in the top 100 television markets
are generally permitted to carry all 'local' television
stations and two (or three, in some instances) distant
independent stations.
Programming on the distant independent stations which
is under contract to the local market television stations is
subject to the FCC ' s syndicated exclusivity regulations.
UTien a ]ocal-market station requests 'protection' of
its programs under the exclusivity rules, a cable system
must 'blackout' the programming on the imported stations
which is also under contract to the local-market station.
Requests for such protection are known by NCTA to be
in force in new CATV systems in such markets as North Little
Rock, Arkansas (Market #50); Plampton and Nevr^port News,
Virginia (Market #44) ; Scranton, Pennsylvania (Market #49) ;
Wauwatosa, V/isconsin (Market #23; ; Albany, New York
581
(Market #34) ; Philadelphia, Pennsylvania (Market #4) ;
North Syracuse, New York (Market #35) .
Some examples of the effect of the exclusivity re-
gulations in these television markets is shown iDelow:
(1) Scranton, Pa., is located in television Market
#49 (Scranton-Wilkes-Barre, Pa.). There are three
network stations in the market. The cable system in
Scranton imports three distant independent stations.
Due to exclusivity requests from all three market
stations, the cable system is losing 32 percent of all
programming from the three disjtant independent stations
during the critical 'prime-time' viewing period of
7-10 p.m. nightly — or the equivalent of a total loss
of one of the three distant stations.
(2) Newport News, Va., is located in television
market #44 (Norfolk-Hampton-Newport News-Portsmouth, Va.)
There are three network stations and one independent
station in the market. The cable system in Newport
News imports two distant independent stations.
582
At present only one of the four mar'ket stations
requests exclusivity protection. Yet, in a recent week,
requests for protection from this one station against
one of the imported stations resulted in the 'blackout'
of 21 percent of the full-day programs on the distant
station.
(3) Wauwatosa, Wi., is located in television market
#23 (Milwaukee, Wi.). There are three network stations
and one independent station in the market. The cable
system, presently under construction, will import two
independent stations when it becomes operational.
Although the system is not yet in operation, it has
already received written and verbal requests for syn-
dicated program protection from all four market stations.
The requests require that 52 percent of the daily
programming of one distant station, and 58 percent of
the daily programming of the other distant station be
'blacked out' .
583
The devastating effect of the program 'blackouts' is
illustrated in the following three pages.
Pages 5 and 6 represent the Friday, January 24, 1975
schedules of the two Chicago independent television
stations to be imported into Wauwatosa.
Page 7 shows the limited number of programs from the
two stations that would be permitted to be shown by
the cable system. Program titles which must be
'protected' are 'Xed' out, and would not be available
to cable subscribers.
584
NON NEnfORK PROGRAMS AVATLADTJ': FROM CHICAGO STATIONS
Garfield Goose
Bewitched
Movie"Lig'ht In The Piazza" {2hrs)
Friday, January 24, 1975
Channel 9 WGN-TV
6:00 AM Romper Room
6:30 Top 0' The Morning
7:00 Ray Rayner
7:30
8:00
8:30
9:00
9:30
10:00
]0:30
' 1:00
11:30
12:00
12:30 PM
1:00
1:30
2:00
2:30
3:00
3:30
4:00
Phil Donahue (60M)
Bozo ' s circus
Father Knows Best
Love, American Style
I Love Lucy
Dealer's Choice
Flintstones
Mickey Mouse Club
Gilligan's Island
Channel 3 2 WFLD-TV
Newstalk (Start 10:55AM)
Nev.' Zoo Revue
Popeye
Magilla Gorilla
Petticoat Junction
Green Acres
That Girl
Banana Splits
Popeye
Little Rascals
Speed Racer
585
NON NETiJ-JORK PROGRAMS AVAILABLE FROM ClirCAGQ STATIONS
Friday, January 24, 1975
Channel 9 WGN-TV Channel 32 WFLD-TV
4:30 PM Bugs Bunny Three Stooges
5:00 Hogan's Heroes Batman (60M)
5:30 Bewitched
6:00 Andy Griffith It Takes A Tliief (60)
6:30 Dick Van Dyke
7:00 Movie" Princess and the Pirate" (2hrs) Diamond Head
7:30 Truth or Consequences
8:00 Merv Griffin(90M)
8:30
9:00 FBI (60)
9:30 Travel World
10:00 News Best of Groucho
10:30 Movie"Hurry Sundown" (2hrs45Min) Untouchables (60)
11:00
11:30 Thriller(60)
12:00
12:30 AM
1:00 News (Startl :15AM)
1:30 Movie (Start 1:45AM)
"Whistling in the Dark" (]hr35M)
2:00
2:30
3:00 Biography (Start 3:20AM)
Source: TV Guide, Illinois - Wisconsin Kdition
57-786 O- 76 - pt. 1 - 38
586
PROGRAMS AVAILADT.K FOR CARRIAGE FROM CHICAGO STATIONS
Friday, January 24, 1975
Channel "^ WGN-TV
Channel 3 2 WFLD-TV
6:00 AM
6:30
7:00
7:30
8:00
8:30
9:00
9:30
10:00
10:30
11:00
11 :30
12:00 N
12:30
1:00
1:30
2:00
2:30
3:00
3:30
•00
', :30
00
30
00
30
00
7:30
0:00
0:30
9:00
9:30
]0:00
10:30
11:00
11:30
12:00 M
12:30
1:00
1:30
2:00
2:30
00
j : 30
5 :
5;
6;
5:
7;
Romper Room
Top 0' The MornJng
Ray Rayner
Garfield Goose
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
Bozo' s circus
xxxxxxxxxxxxxxxxxxxxx
Love, American Style
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
Andy Gri f f ith
xxxxxxxxxxxxxxxxxxxxx
Movie"Princess and Pirate"
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
.^IGWS
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxx;:xxxxxxxx
xxxxxxxxxxxx. :xxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
/.'f^WS
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxx- :xxxxxxxx
xxxxxxxxxxx::xxxxxxxx
ond)
Newstalk
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
Green Acres
xxxxxxxxxxxxxxxxxxxxxx
Banana Splits
xxxxxxxxxxxxxxxxxxxxxx
Little Rascals
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
It Takes A Thief
Diamond Head
Truth or Consequences
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
Travel World
Best of Groucho
xxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxx
Thriller
(end)
XX. xxxx No Program Service On Tlie Channel
587
SUGGESTED AMENDMENTS TO H.R.2223
SUBMITTED BY
NATIONAL CABLE TELEVISION ASSOCIATION, INC,
June 11, 1975
588
AMENDMENT TO H.R. 2223
1. A basic premise of the FCC's restrictions over the
years has been that CATV is somehow engaged in unfair competi-
tion because it doesn't pay for the programs it carries. Once
CATV pays copyright for over-the-air signals, this rationale
is destroyed and CATV ought then to get what it pays for.
Thus, the bill should contain language directing the FCC
to eliminate the non-duplication and syndicated exclusivity
rules.
On page 15, line 17, strike out "in" and all that
follows down through line 23 and insert in lieu thereof
the following:
where the cable system, at least one month before
the date of the secondary transmission, has not
recorded the notice specified by subsection (d) .
(3) A cable system whose secondary transmissions
have been subject to compulsory licensing under
subsection (c) shall not be required to delete
any programming from any signals authorized by
the Federal Communications Commission or lawfully
carried by such system.
589
AMENDMENT TO H.R. 2223
2. This amendment would malce the fee schedule in
H.R. 2223 applicable only to revenues in excess of the first
$25,000 of quarterly gross. It is felt that this initial
$25,000 reflects, on an industry-wide basis, the amount
of revenue earned from the carriage of purely local
signals .
On page 16, line 20, strike out "up to $40,000"
and insert in lieu thereof "totalling more than
$25,000 but not more than $40,000".
590
AMENDMENT TO H.R. 2223
3. Chapter 8 of H.R. 2223 provides for a Copyright
Tribunal, which is a mechanism for periodic review of CATV's
fees. The first readjustment would take effect within 18
months after the Act became law, and then every five years
thereafter. This infinite arbitration provision could
result in a hefty increase in CATV's copyright fees over
the years. CATV's fee should be set in the bill and not be
subject to change except by future legislation. This amend-
ment deletes CATV fees from those that can be reviewed
periodically by the Copyright Tribunal.
On page 58, line 33, strike out "sections 111 and"
insert in lieu therof "section".
On page 58, line 34, strike out "and" and all that
follows down through "fee" on page 59, line 7.
On page 59 beginning on line 13 strike out "sections
111 and" and insert in lieu thereof "section".
On page 59, line 17, insert "section 115 of"
immediately before "this title".
On page 16 beginning on line 9, strike out the
following :
"irrespective of source and separate statements
of the gross revenues paid to the cable system for
591
advertising, leased channels, and cable-casting
for which a per-program or per-channel charge
is made and by subscribers"
592
AMENDMENT TO H.R.2223
4. Although the initial fee schedule is clearly
imposed only on revenues from recurring charges for the
basic cable service, portions of Section 111 and Chapter 8
raise the spectre of copyright fees also being based in the
future on revenues from other sources. This is clearly
improper since copyright is and will be paid for product
used in such other services as local program origination,
leased channel operations and pay cable. In the event
periodic review of CATV fees remains in the bill, this
amendment will eliminate the above possibility.
On page 59, beginning on line 2, strike out
"or the revenue basis in respect to section 111."
On page 59, beginning on line 6, strike out "or
the revenue basis on which the royalty fee shall be
assessed or both."
593
AMENDMENT TO H.R. 2223
5. Chapter 5 of H.R. 2223 contains the remedies for
infringement. One special provision gives broadcasters the
right to file copyright infringement suits. This would appear
to cover such things as accidental carriage of programs which
should have been blacked out by the cable system under the
non-duplication or syndicated exclusivity rules. In addition
to the nuisance value of these suits, the statutory damages
and attorney's fees could cause substantial expense. Violations
of the Fee's rules should be brought to the agency, not to the
courts by a broadcaster. Thus, the amendment deletes the
broadcaster's right to sue the cable operator. The true
copyright owner's right to sue for infringement remains intact.
On page 47 strike out line 18 and all that
follows down through line 25.
594
AMENDMENT TO H.R.2223
6. Governmental and non-profit translators are
exempt from copyright under section 111 (a) (4) of H.R.2223.
This amendment would delete that section.
On page 14, line 18, strike out ";or" and insert
a period in lieu thereof.
On page 14, strike out line 19 and all that
follows down through line 25.
595
AMENDMENT TO H.R.2223
7. There is some language in Section 111 which leaves
the cable operator's liability for copyright on leased
channels somewhat ambiguous. It seems clear that a cable
operator is like a common carrier in those situations and
therefore only the lessee should bear copyright liability.
This amendment clarifies a CATV operator's liability for
copyright on leased channels.
On page 14, beginning on line 8, strike out "a
common, contract, or special" and insert in lieu
thereof "any".
596
AMENDMENT TO H.R.2223
8. Section 111(b) covers the "secondary transmission"
of over-the-air pay TV programs. There is a potential conflict
between this provision and the FCC's rules regarding carriage
of such stations. This amendment insures that no conflict
can occur.
On page 14, line 27, strike out "Notwithstanding
the provisions of" and insert in lieu thereof "Except
as provided in".
On page 14, line 33, before the period insert the
following:
:Provided, however. That such secondary transmission
is not actionable as an act of infringement if the
carriage of the signals comprising the secondary
transmission is required under the rules, regulations,
or authorizations of the Federal Communications
Commission.
597
AMENDMENT TO H.R.22 23
9. The following amendment cleans up the language
in section 111 (e) relating to the necessarily nonsimultaneous
carriage of television stations by CATV systems located in
Alaska, Hawaii and the various territories and possessions.
On page 17, beginning on line 29, strike out "or"
and all that follows down through line 33 and insert
in lieu thereof ":Provided, however. That a nonsimul-
taneous further transmission by a "cable system" not
located in whole or in pSrt within the boundary of
the forty-eight contiguous States, territories or
possessions of a,"
598
Mr. Kajstenmeier. Next the Chair would like to call Mr. David O.
Wicks, Jr., representing Becker Communications Associates.
I would observe this is our second witness, if we take as long with
the second as we did with the first, the energy bill will be completed
before we are.
Mr. Wicks, we welcome you. You have a statement here?
Mr. Wicks. Yes, sir.
Mr. Kastenmeier. Without objection your statement and exhibits
will be received for the record, and you may proceed.
TESTIMONY OF DAVID 0. WICKS, JR., BECKER COMMUNICATIONS
ASSOCIATES
Mr. Wicks. Thank you, sir. I will attempt to be as brief as I can
and refer to the statement at various points.
Mr. Chairman, my name is David Wicks. I am a vice president of
Warburg Paribas Becker, Inc., headquartered in Chicago, 111. With
me today on my right is Charles W. Petty, of Mayer, Brown & Piatt,
counsel for Becker.
Our firm, and its predecessor, A. G. Becker & Co., Inc., has for a
number of years rendered investment banking and other financial
services to members of the CATV industry. During the last 3 years,
Becker and its affiliates have been one of the principal sources of CATV
financing. During this period, I have been primarily responsible for
obtaining debt financing for the larger multiple-system cable television
operators.
In 1973, A. G. Becker organized Becker Communications Associates
as a limited partnership for the purpose of lending to the cable tele-
vision industry in partnership with insurance companies, banks, and
other ihstitutional lenders. I was instrumental in the formation of
Becker Communications Associates and have a partnership interest in
the firm. I appear here today as a representative of Becker Communi-
cations Associates, and at the request of the [NCTA] and various
individual CATV operators. However, I wish to point out that the
views I will give are my own and may not be representative of these
various interests.
I will not address myself to the pros and cons of copyright legisla-
tion for the cable industry. However, I wish to make two points with
respect to the impact of H.R. 2223 on the television financing as we
see it today.
First, the copyright royalty schedule provided in section 111(d) of
the Bill will have a substantial and adverse effect on the net income
of CATV operators and on their ability to raise additional capital
either in the debt or equity market. An increase in the level of these
fees would have even more severe consequences.
Second, the provision in section 802 of the bill for an adjustment
every few years introduces a serious financial uncertainty and impedes
the industry's ability to obtain botli medium- and long-term capital
investment. In our opinion the combined effect of the liability im-
posed by the bill for copyright royalty payments, together with un-
certainty as to the future level of tliese payments, will operate to
substantially reduce the availability of both debt and equity financing.
As pointed out by the Committee for Economic Development, cable
television is a capital-intensive industry, and our findings certainly
599
confirm this point. Exhibit 1 presents data on the nine leading CATV
companies for which such data is publicly available. This group had
total revenues in 1974 of $265 million, and outstanding long-term debt
of $517 million.
By comparison, Dennis McAlpine, of the investment banking firm
of Tucker, Anthony & E. L. Day, in testimony earlier this year before
Senator Hart's commitee, reported that the nine leading broadcasting
companies generated revenues of $3.6 billion, or about 13 times as
great as the CATV companies, but had long-term debt outstanding of
$573 million, only slightly greater than that of the nine leading CATV
companies.
Put in a different perspective, these CATV companies have approxi-
mately $1.95 of debt per dollar of revenue compared to 16 cents for
the broadcasters.
In such a highly leveraged industry as cable television, what might
be considered small changes in costs can have a major impact on net
income and consequently on the ability to raise additional equity cap-
ital, which in turn provides the base for additional debt financing.
Becker Communications, and its affiliates, are in continuing contact
with lenders to the CATV industry and regularly compile statistics
on the availability of debt and equity financing. Within the last several
months, in connection with a report which was submitted to the Fed-
eral Communications Commission, we have contacted the leading lend-
ers to the industry and have developed statistics on capital availability
in 1975 and 1976 from 32 commercial banks, 10 intermediate term
lenders, and 34 insurance companies which combined represent the
bulk of the financing for tlie industry. A copy of this report is at-
tached as exhibit II. Our survey showed the availability of approxi-
mately $185 to $200 million in each of the next 2 years for the CATV
industry dependent upon what assumptions are made by the various
lenders as to iinproved profitability of specific firms within the
industry.
While it is difficult to accurately project the true capital requirement
of the industry — as pointed out by these institutions — we believe this
level of financing is inadequate to provide for any substantial expan-
sion of service or construction of new plant facilities. As a reference
point, under proposed regulations of the Federal Communications
Commission, a large number of cable companies serving the top 100
markets would be required to make substantial expenditures on exist-
ing plant in order to bring their systems in compliance with the Com-
mission's 1972 rules on channel capacity and two-way communication
capability. The NCTA has estimated the cost of this upgrade program
to be approximately $423 million, if completed by the Commission's
deadline of March 1977.
If the cable television business is to raise even a fraction of the
capital estimated to be necessary before it comes into compliance with
the Commission's rules and builds substantial additional capacity, it
must become a profitable industry. As Mr. Bradley pointed out, and
as exhibit I shows, the nine CATV companies lost a total of approxi-
mately $16.3 million in 1974. Obviously, these results must improve
before substantial new capital will be available.
This is not to say that the nine leading companies whose results are
summarized in exhibit I represent a cross section of the entire industry.
However, the lenders to the industry tend to view the industry in
600
terms of the publicly available data for the large firms, and we do not
have any evidence that financing is more easily obtained by smaller
firms. Indeed, the experience of my firm is that such smaller firms
have greater difficulty in obtaining financing.
In our opinion, the copyright royalty rate provided for by section
111(d) of the bill, even though it has been said by some to be nominal,
will substantially impede the ability of both the larger publicly owned,
and the smaller privately owned companies to obtain additional in-
vestment capital.
Let me attempt to illustrate the impact of copyright royalty pay-
ments with a specific example. At the present time, the average revenue
per subscriber is in the range of $5 to $6. Assuming a relatively high
level of $6.50 per month, our studies of representative firms in the in-
dustry show that the level of operating and general and administra-
tive costs have been approximately 62 percent ; interest approximately
14 percent, and depreciation approximately 19 percent, leaving a pre-
tax profit of only about 5 percent, or 33 cents in the example.
The imposition of a 2i/^-percent royalty rate introduces an addi-
tional cost of 16 cents per month on the $6.50, reducing pre-tax profits
to 2.3 percent, a decline of 50 percent in pre-tax profits. This is an un-
acceptably low return on revenues either for debt or equity financing.
It might be argued, as the questions this morning suggested, that
the fee might be passed on to the cable subscriber and profitability
improved. However, the experience of the industry, as we have seen,
has been tliat local franchising authorities are reluctant to increase
rates on a timely basis to keep pace with increasing costs, and there are
indications, as we have seen, of market resistance to increased sub-
scriber rates over the currently prevailing levels.
I have alluded to a second concern of those in the business of lend-
ing funds to this industry, and that is the potential for successive in-
creases in the copyright royalty rate during the term of long-term
financing. This could result from action by the copyright royalty tri-
bunal which would be created by section 802 of the bill. The bill sets
no limit on the rate which might be imposed in a future year, thereby^
raising at a minimum the possibility of significant changes in the as-
sumption upon which such financing was arranged. Lenders can be
expected to respond to this uncertainty by increasing their rates, lend-
ing smaller amounts for shorter periods of time, or imposing other less
favorable terms on CATV borrowers. Thus, uncertainty has its own
separate cost to the industry.
In conclusion, Mr. Chairman, although we are not here to question
the concept of liability for payment of a copyriglit royalty fee, the
amount of that fee must be viewed in terms of the impact which it will
have upon the industry's ability to obtain the additional financing
which is essential to its growth and development as a significant com-
munications medium.
Further, tlie uncertainty created by the open-ended power granted
to the Copyright Royalty Tribunal to adjust that fee in future years
is itself a significant impediment to the industry in obtaining such
financing.
I have not previously mentioned one further aspect of section 802
which IS a cause for concern. It is not clear from this provision that the
tribunal's power of adjustment would be limited to the amount of the
601
fee itself. Section 802 appears to provide that the tribunal can also
change the revenue basis on which the royalty fee is assessed, per-
haps even to include services which do not involve copyright issues at
all. ^Ye are not certain how broadly this povrer might be construed and,
frankly, Mr. Chairman, Iin almost afraid to ask, and that of course
is the point, uncertainty has its own cost.
I appreciate the opportunity to appear before this subcommittee.
Do you have any questions ?
Mr. Kastenmeier. Thank you, Mr. Wicks, for a very useful sum-
mation of the financial difficulties of cable television.
Although I observed that you, yourself, and and obviously Becker
Communications have great faith in cable television for you to con-
centrate in investing, financing, you must believe in the future of this
industry.
Mr. Wicks. I would say that is a fair statement.
Air. Kastenmeier. It appears to be, perhaps like broadcasting, an
industry which would require a great deal of capital at the outset, but
which, if successful, would require less as the years go by. Consequently
early financial statements in terms of the industrj^ would appear to
be not particularly good ; but in the long term they would be in terms of
showing profit, would be much more promising.
Like television itself, like broadcasting which, in a sense if you
compare them, radio broadcasting, two generations old, with tele-
vision, already a generation old, would have less long-term debts than
a relative newcomer, cable itself. But the outlook would not be much
di fie rent than for the broadcasting industry, is that correct ?
Mr. Wicks. Well, I think there are a number of points in your ques-
tion, sir. I want to point out that I am not as familiar with the othe'r'
communications industries as I am with cable television. But it would
seem to me, one way to answer your question is that a number of the
CATV companies have within their plants television studios, which
I have been told are on par with the local stations. Therefore, it would
seem to me that the level of expenditures a cable television operator!
has to go through to deliver signals would be greater in total, as you
pointed out, in tlie first stages of the industry.
Mr. Kastenmeier. One other question or observation. Obviously,
as a financial adviser and consultant as far as the industry is con-
cerned, you are interested in certainty in terms of the risk and cost,
and I would therefore presume that you would want this matter re-
solved one way or the other, rather than for it to be open-ended, for
any sort of potential litigation really knowing— notwithstanding the
two court suits— not really knowing, ultimately, what the resolution
might be on the question of liability for cable television, is that not
correct ?
Mr. Wicks. That is correct, sir. When we look at a new company,
we know there are a number of items within the projection which will
be subject to change; and the more we can reduce the changes, or the
magnitude of those changes, the easier it is for us to structure a loan
that is in keeping with the abilities of the borrower.
Mr. Kastenmeier. Congressman Badillo referred to another pros-
pect, namely that the principle of the viability be established, and you
negotiate from there. Would you not agree that the bill in its present
form already determines a number of questions with some certainty ?
57-786— 7G—pt. 1 39
602
That is to say, there is a compulsory license; there is a statutory
formula fixed, even though it is subject to the tribunal's discretion
after July 1, 1977.
In other words, there are a number of established points which
reduce the unknown character of the liability already fixed in this
bill ; is that not true ?
Mr. Wicks. Yes, sir.
Mr. Kastenmeier. I yield to the gentleman from Illinois. ]\Ir.
Railsback.
Mr, Eailsback. Your exhibit 1 shows shareholder equity. Is that
the shareholder equity of all of the asset value, or how is that
determined ?
Mr. "VViCKS. That, sir, is generally from the statement submitted
to the shareholders which is assets less all of the liabilities. Or, to put
it in different form, that would be the portion on the bottom right-
hand portion of the two-page financial statement that is normally
called shareholders' equity ; it includes the invested capital and interest.
Mr. Eailsback. I notice that Teleprompter and Tele-Communica-
tions seem to be major losers, why is that ?
Mr. Wicks. Major losers, sir, in the case of net income?
Mr. Railsback, As far as return on equity, and revenue are
concerned.
Mr. Wicks, Well, certainly on both of them there is a negative
return. I cannot comment, not having detailed knowledge on the two
companies, what the key elements of each of these losses were,
Mr, Railsback, But, vou disagree, then, with the National Associa-
tion that you do not agree to the fee schedule that was provided in
the bill. You are not objecting to a copyright liability, but you object
to that fee schedule ; is that correct ?
]\Ir. Wicks. No, sir; that is not correct. I am attempting here to
show that there will be an inpact of any level that is imposed on the
industry ; and for purposes of this illustration used the number that
was in the bill.
Mr. Railsback, As I understand it, you are really not objecting to
a liability, are you ?
Mr. WiCK^, No, sir. Not being an operator I don't have quite the
same feelings as to whether liability for copyright here is correct, I
am attempting to say that if a liability is imposed, that will have
an impact both to debt provider and equity investor.
Mr. Railsback. That is all I have, Mr. Chairman.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson,
Mr, DANiELsoisr. Following up Mr, Railsback, my understanding of
this presentation is that you are here to furnish us with a warning that
if copyright liability is imposed, it definitely will result in a financial
burden to these CATV companies which could impair their ability
to obtain financing.
And, two, that if the tribunal, called for in the bill, is established
and given jurisdiction to regulate this copyright liability, then (1)
the uncertainty of such a liability will again impair the financing
capacity of these companies; and (2) somewhat to the side, the lan-
guage of the bill does not restrict the tribunal necessarily on just
plain rates. These are really your points.
Mr. Wicks. I believe so.
603
^h\ Danielsox. In addition to your own current company, which
was formed in 1973, Becker Communications Associates, that is a
successor to a previous organization, A. G. Becker Co., Inc.
Mr. Wicks. No, sir. Warburg Paribas Becker is the successor to
A. G. Becker. Becker Communications is a separate company which
was formed by, in this case, Becker.
jNIr. Danielsox. Well, I guess I inferred incorrectly from your
statement. You mentioned the predecessor A. G. Becker, and of course
you are talking about Warburg Paribas Becker, Inc.
]\Ir. Wicks. That is correct.
Mr. Danielsox. You have had 2 years with this later organization.
How long a time were you affiliated with the prior organization?
IMr. Wicks. Well, I have been with A. G. Becker for 7 years ; and
prior to that I was in the financial community, a commercial bank.
Mr. Daxielsox. At that time, were you involved in providing financ-
ing for C ATV operations ?
Mr. Wicks. Not as a specialty, no, sir.
Mr, Daxielsox. Your experience, then, in that field goes back 7
years ?
Mr. Wicks. Well, my general financing goes back approximately
12 years.
]\[r. Daxielsox. I am talking about cable.
Mr. Wicks. Cable 3 years.
Mr. Daxielsox. In that time, has there come to your attention any
instance of a cable company becoming insolvent, having to close down
for financial reasons ?
Mr. Wicks. I can't answer your question specifically in terms of the
real nature of insolvency and bankruptcy. To the best of my knowledge
there has not been a loss to a debt holder. I think there have been
instances in which the lender has had to take action which may, or
may not have impacted on the equity holder; but that the debt at
some point was repaid, or the loan was put back on a current basis.
Mr. Daxielsox. In the general term of financial failure, they have
survived.
Mr. Wicks. Yes, sir. But I am not a lawyer, so I want to be a little
careful. I think there have been instances in which companies have
filed under the banki'uptcy law, or other similar such things for pro-
tection of various interests.
I don't know of any outright absolute failure in which everybody
lost their total investment.
Mr. Daxielsox. But, as a counterpart to that, it is my understanding
of your statement that many of the CATV companies are operating
on a rather thin profit margin.
Mr. Wicks. Yes, sir. I would say that most of the lenders tha.t I
know" in this industry are watching these companies on a monthly
basis; and as far as the ability to cover interest and principal, some
of them are very tight, especially as we came through last year.
Mr. Daxielsox. The potential impact of copyright royalty liability
and the determination of the liability rate is something, then, which
you feel must be considered most carefully by this committee.
Mr. Wicks. Yes, sir.
Mr. Daxielsox. You have a comment on page 6 that there seems
to be a reluctance by local franchising agencies to grant increases in
rates on a timely basis. Have you observed that in your experience ?
604
Mr. Wicks. Yes, sir. I think the best way to describe that is that the
cable operators today that we have worked with have said that costs
have soared over the Last 4 to 5 years. Over a long period of time, the
increases have been coming along. And then, when they got to the
point where it was necessary, they went before the local council.
Because of the fact that these people do not see that kind of a request
very often it requires a long time for them to go through the pro-
cedures and try and understand the implications. It seems to take a
lot longer, perhaps, than with other regulatory units that might be
more familiar with financial statements.
Mr. Danielson. And you cite two articles, indicating that there is
resistance in the market to an increase in rates. That would be apart
from the franchising board.
Mr. Wicks. Yes, sir.
Mr. Danielson. You have read those articles, I assume; I have not.
Do they seem to be sound, or not ?
Mr. Wicks. They seem to be sound from my point of view, watching
my clients preparing their marketing plans ; and also in terms of the
projections that we work on together, as to what rate level you can
assume these subscribers will be willing to pay over a period of time.
Mr. Danielson. I think we must keep that in mind. I am going to
read that article. Before we impose the copyright liability here, there
certainly has to be an adjustment in the compensation of the cable
systems to make up for that cost.
Mr. Wicks. It seems to me, some of the resistance is, people reach
a point beyond which they don't want to pay for something they
believe they are already getting for free.
Mr. Danielson. Well, that may be inherent in the industry. I have
no further questions, thank you very much.
Mr. Kastenmeier. The gentleman from California, Mr. Wiggins.
Mr. Wiggins. Well, I don't want to unduly belabor a rather straight-
forward statement — you make the position quite clear. But I would like
to try to understand the importance of this factor of uncertainty as it
may impact lenders and investoi-s by asking several questions.
It seems to me that lenders and investors have already accepted a
great many hazards in this industry. First of all, they have accepted
the risk that technological changes will render the whole operation
obsolete.
You have accepted the risk of a certain degree of FCC regulations
w^hich may affect profitability. I think if you accept the risk that the
governmental unit granting the franchise may revoke it, placing your
borrower out of business absolutely, you accept the risk of certain un-
regulated costs, labor, interest charges and normal operating expenses,
which have been escalating. You accept the risk of taxation, and the
uncertainty implicit in that.
And the question is, can j^ou endure the risk of a regulated rovalty
schedule, or is that going to be the straw that breaks the camel's back.
Now, do you think that is so important that it will be the unacceptable
risk that will cause lenders to reverse their traditional willingness to
advance credit for cable operations ?
Mr. Wicks. No, sir, we don't see that as the straw that breaks the
camel's back. I think that the point is the industry is not in a strong
position to go to the capital markets. And I think the added level of
605
imcertainty will have a negative impact on the industry's ability to
continue with those lenders.
There are a great many insurance companies in this country who lend
money to industrial concerns. Out of all those insurance companies —
and I'm sorry I can't tell you what the number is, it must be in the
thousands — there are only 13 who regularly review cable television
proposals. And of those 13 today less than half will accept, or entertain
a proposal from a cable company. I have been able to follow this
market for some time and it is currently very, very thin.
And this kind of uncertainty gives the finance commitee, if you will,
who reviews these loans, trouble in accepting that these loans can be
made ; they would much rather lend to something that is more certain.
So, it is not the straw that breaks the camel's back, but it doesn't
help.
Mr. Kastenmeier. The gentleman from Massachusetts, Mr. Drinan.
Mr. Drinan. I wonder, Mr. Wicks, if you think we have the power
to force the local authorities to make the nevv^ price — 16 cents per
month, as you mentioned — a passthrough which is automatically added
to the royalty that they pay, or the fee that they pay every month.
In other words, if it's 16 cents per month, as you suggest, $1.92 per
year, do you think we have the power to say that's a passthrough which
would not, therefore, be adversely affecting the profits of the industry ?
Mr. Wicks. I can't answer the question whether you have the power
to do that. It may be that can be done, but then you get to the point of,
will the consumer, who is currently paying $6, or $7, will he be willing
to continue on this service. He may decide that that is the straw that
broke the camel's back and unhook.
Mr. Drinan. I'm advising that you overstate your case, in all candor,
$1.92 a year, that is a very small rise, and something that is really in-
expensive, $5, or $6.50 a month. If the passthrough were there, your
argument would crumble, would it not, as to the adverse effect ?
5lr. Wicks. Well, I agree the 16 cents doesn't seem that large. On
the other hand, there are other fees that are being passed through, plus
the fact that the $6.50 fee may have just been raised from $5, or $5.75.
Mr. Drinan. Do you think the 21^2 percent royalty rate is in the ball
park, is something that would be acceptable, or do you think that's
inevitable?
Mr. Wicks. I think the 21^ percent is certainly easier for the industry
to live with than the higher fees that I saw in earlier testimony, a few
years aa:o, of 16 percent, or as we heard this morning, 20-some percent.
Mr. Drinan. Thank you very much for your testimony. I yield back.
Mr. Kastenmeier. The gentleman from New York, Mr. Badillo.
]\Ir. Badillo. As I understand your statement, you say you take no
position whether the copyright fee should apply, but you say that if the
present schedule applies, it is beyond the ability of the industry to
bear that ; is that correct ?
Mr. Wtcks. It does have a financial impact, yes sir. I don't say it
is beyond the capability of the industry to survive.
Mr. Badillo. What do you recommend, if anything ?
Mr. Wtcks. I don't think I'm in a position to represent a level that is
livable. T liave not analyzed the industry from that point of view.
]Mr. Badillo. Well, you have analyzed the industry from the point
of view of its costs. I happen to be a certified public accountant, among
606
other things, and I am struck by the fact that the depreciation, accord-
ing to your schedule, is 20 percent. Isn't that unusually high for an
industry?
Mr. Wicks. I'm not sure I'm qualified to put that in perspective to
other industries. I think it is a fairlj^ consistent number for this
industry.
Mr. Badillo. What is the average life of the assets ?
Mr. Wicks. Well, I think it is quite varied, sir. There may be others
in a better position to answer that question. I know the accounting
practice is, as one might read in the footnote, that there may be 10
different average lives defined.
Mr. Badillo. But since you said you think they can't pay because
you add up these items and get to a very small amount, I just wanted
to Iviiow how you get to these amounts. Isn't the interest rate of 14 per-
cent very high, and probably matched only bv institutions such as
New York City ? [Laughter.]
]Mr. Wicks. Yes, sir, it's high ; but this is a very leveraged industry.
Mr. Badillo. But doesn't that depend on how much you want to in-
vest ? If you decide you want to put a certain amount of money into
stock, and you want to borrow money, you can adjust the interest rate,
depending upon how much of an equity you want to put in, and how
much you want to borrow. If you put in a very small investment, and
you borrow 95 percent, then you are going to have a very high interest
rate. If j^ou put in a different kind of investment, then you have a lower
interest rate. Isn't that so ?
Mr. Wicks. Yes, sir, that is accurate ; but I don't think it would be
fair to characterize this industry as having the ability to have that
kind of choice. The average company in that industry is extremely
small, and the ecmitj'
Mr. Badillo. Closely held, too ?
Mr. Wicks. Very closely held.
Mr. Badillo. And they can also determine the administrative ex-
penses more closeh^ than one that is not closely held. For example,
62 percent for operating and administrating expenses may have a
small profit, but that may include, if it is a closel}^ held company,
salaries and traveling expenses of the stockholders.
Mr. Wicks. I think in most cases, sir, the stockholders are the man-
ager-owners, and probably don't pay themselves much of a salary. I
would say that most of the expenses in there are fairly fixed.
Mr. Badillo. Well, isn't that, then, the reason why — obviously we
can't examine the books, and I'm not here to be a certified public
accountant. If you cannot, as someone who is concerned with the indus-
try, if you cannot even make a recommendation, isn't that the reason
why maybe, instead of having a fee altogether, fee schedule altogether,
the entire thing should be left with the tribunal, and let the tribunal
examine the books and determine whether the 14 percent interest
rate is proper, or is just really under-financing of the company; and
determine how the life of the assets is to be spread out, so that the
depreciation can be computed, and determine whether the salaries are
proper.
Isn't really a tribunal which can study the financial condition of
these companies the best form to reach a conclusion, since even you,
who have been in the industry for such a long time, cannot make a
recommendation to this Committee ?
607
Mr. Wicks. Well, sir, I think from my point of view, there is more
certainty setting up a number in a schedule, than there is leaving this
to a tribunal.
Mr. Badillo. But you can't make a recommendation, so, how are we
su])posed to get to an amount ?
Mr. Wicks. Well, I don't think it would be proper for me to make
that determination.
Mr. Badillo. No further questions.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
^Ir. Paitison. I have no questions.
ISIr. Kastexmeier. That concludes the questions. JNIr. Wicks, we ap-
preciate your appearance here this morning.
[The prepared statement of Mr. David Wicks and exhibits follow :]
Statement of David O. Wicks, Jr., Becker Communications Associates
My name is David Wiclis. I am a Vice President of Warburg Paribas Becker
Inc., lieadquartered in Cliicago, Illinois. Our firm, and its predecessor, A. G.
Becker and Co., Incorporated, has for a number of years rendered investment
banking and other financial services to members of the CATV industry. During
the last three years, Becker and its aflSliates have been one of the principal
sources of CATV financing. During this period, I have been primarily responsible
for obtaining debt financing for the larger multiple system cable television
operators.
In 1973, A. G. Becker organized Becker Communications Associates as a
limited partnership for the purpose of lending to the cable television industry
in partnership with insurance companies, banks and other institutional lenders.
I was instrumental in the formation of Becker Communications Associates and
have a partnership interest in the firm. I appear here today as a representative of
Becker Communications Associates.
I will not address myself to the pros and cons of copyright legislation for the
calile industry. However, I wish to make two points with respect to the impact
of H.R. 2223 on cable television financing as we see it today. First, the copyright
royalty schedule provided in section 111(d) of the Bill will have a substantial
and adverse effect on the net income of CATV operators and on their ability to
raise additional capital either in the debt or equity market. An increase in the
level of these fees would have even more severe consequences.
Second, the provision in section 802 of the Bill for an adjustment in the royalty
rates after July 1, 1977, and during calendar year 1984 and in each subsequent
fifth calendar year thereafter, introduces a serious financing uncertainty which
will impede the industry's ability to obtain both medium and long term capital
investment. In our opinion, the combined effect of the liability imposed by the
Bill for copyright royalty payments together with uncertainty as to the future
level of these payments will operate to substantially reduce the availability of
both debt and equity financing.
It is recognized that cable television is a capital Intensive industry. In its report
entitled, "Broadcasting and Cable Television : Policies for Diversity and Change,"
the Committee for Economic Development notes that the future development of
cable television will be determined in great measure by the availability and cost
of capital. Yet, the Report continues : "Because of the economic and regulatory
climate, venture capital is presently in very short supply. These difficulties are
compounded by the fact that the construction of the cable system requires a very
heavy initial investment. Furthermore, the return in the early years is slow. It
may be 10 years or more before an investor realizes substantial profit."
Our findings confirm this point. Exhibit I presents data on the nine leading
CATV companies for which such data is publicly available. This group had total
revenues in 1974 of $265.5 Million and outstanding long-term debt of $517 Million.
By comparison, Dennis McAlpine of the investment banking firm of Tucker,
Anthony & R. L. Day, in testimony on May 22, 1975, before the Senate Anti-Trust
Subcommittee chaired by Senator Hart, reported that the nine leading broadcast-
ing companies generated revenues of $3.6 Billion, about 13 times as great, but had
long-term debt outstanding of $573 Million, only slightly greater than that of
the nine leading CATV companies. Stated another way, the CATV companies
608
had approximately $1.95 of debt per dollar of revenue as compared to 16 cents
for the broadcasters.
In such a highly leveraged industry as cable television, what might be consid-
ered small changes in costs can have a major impact on net income and conse-
quently on the ability to raise additional equity capital, which in turn provides
the base for additional debt financing.
Beclier Communications, and its affiliates, are in continuing contact witli
lenders to the CATV industry and regularly compile statistics on the availability
of debt and equity financing. Within the last several months, in connection
with a report which was submitted to the Federal Communications Commission,
we have contacted the leading lenders to the industry and have developed statis-
tics on capital availability in 1975 and 1976 from 32 commercial banks, 10 inter-
mediate term lenders and 34 insurance companies.
The lenders included in this survey have provided a substantial portion of the
total available debt financing for CATV construction and operation. Accordingly,
their projections as to future financing plans provide the best and most authorita-
tive indication of expansion prospects for the cable television industry. A copy
of this report is attached as Exhibit II. Our survey showed the availability of
approximately $185 to $200 Million in each of the next two years, dependent upon
what assumptions are made as to improved profitability of specific firms within
the industry
While it is difficult to accurately project the true capital requirements of the
CATV industry over this time frame, we believe this level of financing is inade-
quate to provide for any substantial expansion of service or construction of new
plant facility. As a reference point, under Proposed Regulations of the Federal
Communications Commission, a large number of cable companies serving the
top 100 markets would be required to make substantial expenditures on existing
plant in order to bring their systems in compliance with the Commission's 1972
Rules on channel capacity and two-way communication capability. The Na-
tional Cable Television Association has estimated the cost of this upgrade pro-
gram to be approximately $423 Million, if completed by the Commission's dead-
line of March 31, 1977.
If the cable television business is to raise even a fraction of the capital esti-
mated to be necessary before it comes into compliance with the Commission's rules
and builds substantial additional capacity, it must become a profitable industry.
Exhibit I shows, however, that the nine leading CATV companies lost a total
of approximately $16.3 million in 1974. Obviously, these results must improve
before substantial new capital will become available.
This is not to say that the nine leading companies whose results are summarized
in Exhibit I represent a cross section of the entire industry. Most CATV operators
are small privately owned firms. However lenders generally tend to view, the
industry in terms of the publicly available data for the large firms and we do not
have any evidence that financing is more easily obtained by smaller firms. Indeed,
the experience of Becker Communications Associates is that such smaller firms
have greater difficulty obtaining financing.
In our opinion, the copyright royalty rate provided for by section 111(d) of
the Bill, even though it has been said to be a nominal rate by some, will substanti-
ally impede the ability of both the larger publicly owned and the smaller privately
owned companies to obtain additional invested capital.
Let me illustrate the impact of copyright royalty payments by a specific example
which is applicable to both large and small operators. At the present time, the
average revenue per subscriber is in the range of $5 to $6. Assuming a relatively
high level of $6..50 per month, our studies of representative firms in the industry
show that the level of operating and general and administrative costs have been
approximately 62 percent, interest approximately 14 percent, and depreciation
approximately 19 percent, leaving a pre-tax profit of about 5 percent, or 33 cents
in our example of a monthly subscription rate of $6.50. The imposition of a 2%
percent royalty rate introduces an additional cost of 16 cents per month, reducing
pre-tax profits to 2.3 percent, a decline of 50 percent in pre-tax profits. This is an
unacceptably low return on revenues either for debt or equity financing purposes.
It might be argued that a fee of this magnitude can be passed on to the cable
subscriber and profitability improved. However, the experience of the industry
has been that local franchising authorities are reluctant to increase rates on a
timely basis to keep pace with increasing costs and both the Committee on Eco-
nomic Development and a leading economic consultant to the industry have found
indications of market resistance to increased subscriber rates over the currently
609
prevailing levels. ( See Mitchell and Smiley, Cable Cities and Copyrights. 5 The
Bell Journal of Economics and Management Science 235 (Spring, 1974). Com-
mittee on Economic Development, Broadcasting in Cable Television : Policies for
Diversity and Change (1975).)
I have alluded to a second concern of those in the business of lending funds to
this industry and otherwise arranging financing, and that is the potential for suc-
cessive increases in the copyright royalty rate during the term of long-term
financing. This could result from action by the Copyright Royalty Tribunal which
would be created by section 802 of the Bill. The Bill sets no limit on the rate
which might be imposed in a future year, thereby raising at a minimum the pos-
sibility of significant changes in the assumptions upon which such financing was
arranged. Lenders can be expected to respond to this uncertainty by increasing
their rates, lending smaller amounts for shorter periods of time or imposing other
less favorable terms on CATV borrowers. Thus, uncertainty has its own separate
cost to the industry.
In conclusion, Mr. Chairman, although we are not here to question the con-
cept of liability for payment of a copyright royalty fee, the amount of that fee
must be viewed in terms of the impact which it will have upon the industry's
ability to obtain the additional financing which is essential to its growth and de-
velopment as a significant communications medium. Further, the uncertainty
created by the open-ended power granted by section 802 to the Copyright Royalty
Tribunal to adjust that fee in future years is itself a significant impediment to
the industry in obtaining such financing.
I have not previously mentioned one further aspect of section 802 which is a
cause for concern. It is not clear from this provision that the tribunal's power of
adjustment would be limited to the amount of the fee itself. Section 802 appears
to provide that the tribunal can also change the revenue basis on which the roy-
alty fee is assessed, perhaps even to include services which do not involve copy-
right issues at all. We are not certain how broadly this power might be construed
and that, of course, is the point. Uncertainty has its own costs.
I appreciate the opportunity to appear before this Subcommittee to present
our views on the impact of H.R. 2223 on cable television financing. I will be happy
to respond to your questions.
610
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EXHIBIT II
Before the Federal Communications Commission, Washington, D.C.
(Docket No. 20363)
In the Matter of: Amendment of part 76 of the Commission's Utiles and Regula-
tions relative to postponing or cancelling the March 31, 1911 date hy which
major market cahle television systems existing prior to March SI, 1912, must
fee in compliance with section 76.251 (a) (i)-(a) (8)
COMMENTS OF WARBURG PABIBAS BECKER, INC.
In connection with the above-referenced Notice of Proposed Rulemaking solic-
iting comments on the March 31, 1977 deadline for compliance with the provi-
sions of Section 76.251(a) (l)-(a) (8) of the Commission Rules, The Becker
and Warburg-Paribas Group, Inc., by its Attorneys, hereby records with the
Commission, its following findings of available Capital Financing for the CATV
Industry, particularly concerning funds available for so called system "rebuild".
The Becker and Warburg-Paribas Group, Inc. ("BWPG") and its predecessor,
A. G. Becker & Co. Incorporated, has over 80 years of experience in the field of
investment banking. Its activities include the granting and distribution of debt
issues, the evaluation of debt and security issues for public and private clients.
The firm is a member of the New York, American, Mid-West and Pacific Stock
Exchanges, as well as the Chicago Board of Options Exchange and numerous
regional stock exchanges. BWPG engages in international investment banking
through its European partners, S. G. Warburg & Co. London and Cie Financiere
de Paris and des Pays Bas in Paris. Further, Becker Communications Associates
("BCA") is an active lender to the CATV industry with approximately $20
million in loans and commitments outstanding and BCA and Warburg Paribas
Becker ("WPB") (a wholly-owned subsidiary of BWPG which handles the
corporate finance activities of BWPG) have five officers who specialize in CATV,
In connection with their corporate finance activities in CATV, the Becker
groups are in continuing contact with the lenders to the Industry and regularly
compile statistics on the lending activities to the Industry In order to provide
the Commission with statistics on the available capital to the Industry, particu-
larly as it might relate to the capital requirements imposed by 76,251, they have,
within the last several vpeeks contacted the leading lenders to the indiistry and
have developed statistics on capital availability in 1975 and 1976. The data sup-
plied herein, therefor, is extremely current.
As a basis for this study, WPB personnel contacted by phone or in person or
compiled data from its files on 32 commercial banks, ten intermediate term
lenders and 34 insurance companies. For many reasons, including the fact that
many companies would not make their figures public, (being prohibited in cer-
tain instances from doing so by contractual obligations) available financing facili-
ties from the equipment suppliers to the Industry or from equipment leasing
companies are not included. The bulk of the contacts with the sampled lenders
occurred in the months of January and February 1975. We believe it to be as
complete a study as has been done to date and certainly the only study which has
been done to our knowledge on this aspect of the CATV lending situation.
As shown in Chart 1, the lender groups had loans outstanding to CATV com-
panies at December 31, 1974 of approximately $1 billion. This group anticipates
lending approximately a further $185 million to the industry in 1975 with a range
of $.360 million to $74 million if the economy and available cash flow should
change appreciably for the better or worse-
Impacting significantly on these general projections will be the level of deficit
financing by the Federal Government. As demonstrated in 1974, during periods of
tightening of available funds, CATV companies find it proportionately more
difficult to get commitments for financing. Further, the emphasis of many com-
mercial banks is to shorten the maturity of their loans which has the effect of
making construction loans to new CATV systems difficult to lustify economically.
The institutions expect to lend slightly more funds in 1976 bnsed, in part, on
an expected improvement in the overall economy and a continued emphasis on
improving reported profits within the major CATV companies.
The projections for 1975 and 1976 are generally speculation or guesstimates on
the part of most institutions since they generally react to loan proposnls rather
than actively seeking loans. However, the most accurate predictions come from
612
the intermediate lenders since the bulk of these institutions have CATV specialist
units and have specific CATV loan budgets for 1975 and 1976. In the same vein,
the least accurate prediction comes from the banks since few have CATV special-
ists and a number of banks make loans to the industry through more than one
lending unit or division. Finally, the widest range in the prediction comes from
the insurance companies and this is a function of demand, credit and rate. Gen-
erally, CATV will be competing in insurance companies with an investment policy
to upgrade their placement activities to A or Baa quality and most CATV bor-
rowers could not qualify for such credit ratings.
Of particular importance to the review of the 1977 deadline, virtually no lender
surveyed felt that they were in a position to help fund a significant portion of
the more than $400 million required capital projected by the ("NCTA") to
bring systems into compliance. Adversely impacting on the ability or desire of
these institutions to supply such funds is the fact that most CATV borrowers
are now judged by lenders to be fully leveraged based on their current subscriber
and cash flow levels. Accordingly, new credit extensions must be based on pro-
jected increases in subscriber levels, additional revenue producing services and/
or other cash flow generating sources not for replacement of equipment The pro-
jections of available flnancing in Chart 1 are for new builds or extensions to
existing systems, refinancing of existing systems to longer maturities and/or
acquisition loans. The basic assumption of the lenders is that the proceeds of
their loan will be used to build plant in front of potential subscribers at a low
enough cost that the actual operating cash flow will be sufficient to amortize their
loan over a fixed period at a given interest rate.
Specific examples of lender comments might be helpful. First, a number of
insurance companies who lend to one of the top 10 public CATV Multiple Systems
Operator companies ("MSO's") have informed the president of that MSO, that
in their judgment the company is fully leveraged and that they will not be able
to lend any funds for 1977 compliance without an increase in unleveraged sub-
scribers, an increase in cash flow and/or an increase in revenue producing
services. Second, a mid-west bank reported that they had found that they could
not lend as much as their borrowers requested when compliance was a factor
because many of the rules did not have an economic justification — that is insuffi-
cient potential revenue to cover the costs. Finally, an intermediate lender reported
that they were concerned about their ability to continue serving their CATV
clients because these clients were being forced to borrow additional funds to
comply with 1977 when the lender actually needed to see these same clients
reduce their outstanding balances in accordance with their note agreement.
An example of the impact in increased cost on the debt capacity of a system
might be the following. Assuming a system in a 100,000 home community at an
industry standard of 100 homes per mile and an average cost of overhead plant
of $7,000 per mile, the plant cost would be $7,000,000.00. Assuming the franchise
holder borrowed this sum and achieved 30% penetration of the 100,000 homes, he
would have debt per subscriber of $233. The ability to borrow on this system will
he shown by the following. Assuming a 10 year loan at 10% interest and a $6.00
monthly subscriber rate with operating costs of 40% resulting in an operating
monthly cash flow level of $3.50 would amortize $266 of debt per subscriber.
(Source: Bond Tables based on $3.50 available cash flow 10 year maturity and
10% interest). Based on current standards, this would be a very difficult loan
to finance as most lenders would want to have a margin of safety greater than
the $33 difference between $266 and $233. Consequently, most lenders would
probably not loan more than $200 per subscriber.
If for FCC rule compliance purposes the franchise holder is in the same situation
and had to increase his costs per mile from $7,000 to $8,000 with all other factors
held constant, the debt per subscriber would become $267. Assuming that this
increased cost would not result in increased subscribers so the monthly cash flow
would be held constant and support $266 of debt, the franchise holder would not be
able to borrow sufficient funds. For purposes of this analysis, we hnve not
considered the infusion of equity capital from the frnnchise holder as this woiild
be offset in part by the need to borrow the initial operating losses.
In summary, based upon WPB's survey of traditional lenders to the CATV
industry, it does not appear that these sources will be able to fund any meaningful
portion of the capital requirement generated by the 1977 rebuild requirements.
We therefore virge the Commission to suspend the 1977 compliance date. Absent
such a suspension, capital investment, if available at all, will be needlessly
613
diverted from construction of new systems and the attainment of a subscriber
and revenue base needed to support the growth and development of the industry.
Respectfully submitted,
Warburg Paribas Becker, Inc.
By John D. Matthews
John I. Davis
Its Attorneys.
SUMMARY OF PROJECTED AVAILABLE DEBT FUNDS FOR THE CABLE TELEVISION INDUSTRY
IN 1975 AND 1976
[Dollar amounts in millions]
Number of Outstandings
institutions at Dec. 31,
surveyed 1974
Projected
1 funding ii
1 1975
High
Low
Most
probable
I. 1975:
Commercial banks
Intermediate lenders
Insurance companies .
32
10
34
$623
104
302
$189
90
81
$44
25
5
$100
44
41
Total... -
76
1,029
360
74
185
Number of
institutions
surveyed
Proje
icted fundii
ng in 1976
1
High
Low/ 1
VIost probable
2. 1976:
Commercial banks
Intermediate lenders
Insurance companies
32
10
34
$236
139
130
$90
47
34
$144
69
81
Total -...
76
505
171
294
Mr. Kastenmeier. Our next witness this morning is Mr. Eobert
Cooper, ExecLitive Secretary of Community Antenna Television As-
sociation. Mr. Cooper, you have a statement. You may X3roceed, and
perhaps you would like to introduce your associates.
TESTIMONY OF EGBERT COOPER, EXECUTIVE SECRETARY OF
COMMUNITY ANTENNA TELEVISION ASSOCIATION
ISIr. CoorER. Mr. Chairman, I would like to introduce the gentlemen
here with me. The gentleman on my left is Mr. Peter Athanas, general
manager of Southern Wisconsin Cable. The gentleman on my right is
Mr. Kyle Moore, the president of the Oklahoma City CATV Associa-
tion. The gentleman on my near left is JNIr. Richard L. Brown, the
general counsel for CATA.
Mr. Chairman and members of the subcommittee, I am Robert
Cooper, executive director of CATA.
CATA, or the Community Antenna Television Association is a trade
association organized in 1973 that today has as members some 400
CATV systems throughout the United States. Originally organized to
focus on proposed copyright legislation, CATA has broadened its
membership and scope of activities to include such matters as par-
ticipating in FCC proceedings. Generally stated, CATA's philosophy
recognizes that the roots of CATV lie witliin the community — hence
our name, a name abandoned in the IDGO's by the NCTA.
We are not here to pull punches or present diplomatic truths, we
are here to present real truths, nor will we play a lengthy numbers
game. You should know, I believe, however, that there are by our count
614
some 25 state and regional associations that have voted against the
NCTA position that was previously testiiied to, I think you can count
by the fingers of one hand the remaining State and regional associa-
tions that still give unqualified support to the NCTA position.
Furthermore, the Pennsylvania State Association and the XCTA's
largest single member company, TelePrompter, have requested and
received time on their own to present views contrary to XCTA. Tele-
Prompter and the Pennsylvania systems, it might be noted, serve some
2 million homes between them, which is appi-oximately 20 percent of
the entire cable industry. Now, these statistics i-eveal only conclusions,
not reasons ; and that is perhaps what we will address in our testimony,
too.
We submit that the only reason CATV copyright presently has
any support is not because the copyright-supporting splinter of the
industry believes that CATV should pay, but because, as you can deter-
mine from testimony before you, it is politically expedient to do so and
because of something called the Consensus Agreement, The XCTA,
NAB, and MPAA can try to explain the agi-eement to 3'ou. For our
part, we will concentrate on the merits as we see them, of the copyright
issue,
CATA is here today because its membership does not believe that
the motion picture industry is entitled to place its hands in the pockets
of CATV operators or CATV subscribers. We reject the joint copy-
right position of NCTA, NAB, MPAA, that CATV owes something
called "reasonable copyright,"
The imposition of copyright on CATV is. in part, a tax — if you
will allow the word — on the viewing public. We also believe it to be a
deception to an American television-viewing public which has been
told time and time again of the benevolence of broadcasters and broad-
casters who delivered "free television,"
As we all know, it is not a free system — it is an advertiser-su]3ported
system which means we all pay once for the programs we watch by pay-
ing higher prices for television-advertised products. Additionally, ap-
proximately 10 million households must also pay a second time by
subscribing to CATV. Now, through copyright legislation, 10 million-
plus cable homes will be asked to pay yet a third time.
Remember that probably CATV would have ne^er come into exist-
ence if the FCC had fastidiously followed the Congressional mandate
of Section One of the Communications Act "to make available, so far as
possible, to all the people of the United States, a rapid, efficient, nation-
wide and world-wide wire and radiocommunications service."
Yet, in our view, some 25 years after the FCC commenced fumbling
with television allocations, 2 million households, or 3 percent of all
homes, receive absolutely no over-tlie-air television signals today. In
fact, it is estimated that over 3 million homes, or some 15 percent of the
total population, still do not receive the three national network sigiials
off the air. It is CATV, however, that over the last 25 years has filled
gaps in the FCCs allocation voids and, incidentally, lent a boost to your
congressionally passed all channel receiver law.
It is antithetical, then, to your Communications Act purposes to
saddle CATV, and through it the American television-viewing public
with a tax for the privilege of watching,
^ Now, copyright is a creation of the legislature under a constitu-
tionally delegated power. Also under the Constitution, you have spe-
615
cifically been delegated power to make laws affecting interstate com-
merce and have done so vis-a-vis broadcasting by passage of the
Communications Act. Today, the Communications Act and Copy-
right Act are in a state of apparent tension. I say "apparent"
because the program suppliers would have you believe that the
main purpose of copyright is to give authors money so that they
will have incentive to write. This is simply not true. Copyright is
not to reward authors, but to insure that creative works find their way
to the public. The Supreme Court has pointed that out in economic
terms, pointing out that copyright grants are made in "the connection
that encouragement of individual effort by personal gain is the best
way to advance public welfare."
Thus, the tension dissolves •when it is realized that Congress has
also established a Communications act and created the FCC to fulfill
similar, if not identical, purposes. Those purposes being to secure the
general benefits of radio and television programing to all the people
of the United States and to encourage their larger and more effective
use in the public interest.
In these stated purposes it is inconceivable that the FCC's own
general counsel could testify before you that CATV should pay just
because the argument has been around for a long time. The FCC"s Mr.
Hardy desires to see resolution of this issue merelj^ for the sake of
resolution. His desire can be accommodated just as well by deleting
CATV from this bill.
There are other voices in and out of the CATV industry who say
that "the copyright issue must be solved — it must be put behind us
because until it is laid to rest, the investment community will not
advance the capital required by cable to expand and grow."
We have no quarrel whatsoever with this line of reasoning, except
when it is expanded to the illogical conclusion that the industry should
simply pay copyright merely to expedite the removal of this uncer-
tainty. Clearly, CATV's future is better served by the removal of
CATV from copyright legislation.
And then there are voices in our industry who say, "We can afford
to pay" with remarks like "What is one or two, or two and-a-half
percent of our gross ?" Well, let me tell you what it is.
In December 1973, CATA, at the specific request of Senator John
McClellan prepared an economic study of more than 250 CATV sys-
tems, ranging upward in size to 5,800 subscribers. In that study, which
we will submit for the record, CATA found, for example, that for
1 percent of gross proceeds to copyright a system of 1,000 to 1,500
subscribers we would experience a reduction of net revenues of 13.8
percent. This happens to be the equivalent, then, of 1 percent of
gross. 13.801 is the number.
Frankly, the industry cannot afford to pay that, and that is the truth.
Xow, lest this be considered solely as a flat dollar exemption, such
as the $100,000, which has been kicked around prior to my testimony,
it is not. Copyright will also adversely affect larger systems, including
multiple-owned systems.
We also regard as fundamental considerations the following ques-
tions which should be asked of every proponent of copyright liability
for CATV:
1. "V^^iy should this industry pay ?
616
2. Who will really pay ? And,
3. Wlio will receive the payments ?
Consider this, there are hundreds of thousands of hospital rooms
around this country, offering television service at a price. Patients
rent a television set and the set supplier, the hospital, and maintenance
man all profit. The rates are as high as $3 a day, nationally, according
to the hospital association. This is an unmolested industry, hospital
television, HOTA^, possibly with gross revenues exceeding cable. Why
are they not in the copyright bill? Simply because, providing the
service of facilitating television viewing is their job. The Supreme
Court has twice held that the same rationale applies to CATV, and
these cases of the Supreme Court are exceedingly instructive. First, one
must lay aside the program-supplier-sponsored misconception that the
cases are irrelevant — relevant, pardon me, because they dealt only with
the 1909 Copyright Act. Of course, the Supreme Court was dealing
with the 1909 Copyright Act, but the decision was made "with due
regard to changing technology'' ; that is not based on 1909 concepts.
In fact, the Court held :
"Mere quantative contribution cannot be the proper test to deter-
mine copyright liability in the context of television broadcasting. If
it were, many people who make large contributions to television view-
ing might find themselves liable for copyright infringement — not only
the apartment houseowner who erects a common antenna for his ten-
ants, but the shopkeeper who sells or rents television sets, and, indeed,
every television set manufacturer. Eather, resolution of the issue be-
fore us depends upon a determination of function that CATV plays
in the total process of television broadcasting and reception."
The Court reasoned that television viewing was a combined ac-
tivity, a combined activity of broadcasters and viewers. Broadcasters
perform, viewers do not. Broadcasters are active performers, viewers
passive beneficiaries. CATV "falls on the viewer's side of the line."
The Court concluded as a matter of separation of powers — not as
a matter of copyright policy — that the job of accommodating "various
competing considerations of copyright, communications, and anti-
trust" belonged to Congress. The Court did not intend that Congress,
in fact, adopt CATV copyright liability.
Then came TelePrompter-CBS, where the Court was faced with
microwaved, long-distance signal importation — more than 450 miles —
by CATV systems that also originated their own programs, also sold
local advertising, and also interconnected with other systems. The
Court found no copyright significance to these auxiliary activities and
found that the distance the signals traveled did not "alter the function
that CATV performs for its subscribers." In fact, the Court stated :
The reception and reclianneling of these signals for simultaneous viewing is
essentially a viewer function, irrespective of the distance between the broadcast-
ing station and the ultimate viewer.
Mr. Chairman and members of this committee, when a television sta-
tion broadcasts, the broadcast is in the public domain. The Supreme
Court characterization of what CATV does is as true today as it
was when the Court made its decision. What CATV does — its viewer
function — is not altered by the words of the 1909 act, or H.E. 2i223.
_ Those advocating CATV liability have a high burden of persua-
sion because CATV does fulfill Communications act goals by making
television more widely available, or often available for the first time.
617
It is a viewer-oriented medium, as are translators, master antennae,
rooftop antennae, and television sets themselves. None of these enti-
ties are prospectively liable for copyright under your bill, and none
should be, for they are all part of the process of nationwide dissemi-
nation of programing that you have legislated in the Communica-
tions Act.
In fact, in TelePrompter-CBS, the copyright holders argued that
CATV prerelease of programs would dilute the profitability of re-
runs and other syndicated properties, thus removing incentive to pro-
duce television programs. The court rejected this argument. It
recognized that the appropriate nexus was missing, that is, copyright
holders do not receive money from the ultimate user — ^the television
viewer — the money comes from the advertisers.
In fact, the Court recognized that the distant signal carriage does
not interfere with the "copyright holders' means of extracting recom-
pense for their creativity and labor" ; and that, in fact, CATV provides
a larger viewing market to the benefit of both the advertiser and the
copyright holder.
We submit that CATV should not pay because CATV does not owe.
This leads to the question of who would really pay, were this bill to
become law. Well, there is no doubt that your imposition of copy-
right on CATV would be, at least in part, a consumer tax on televi-
sion viewing. Must the cable viewer hmiself pay it? It could stop at
the cable company, as it was pointed out, but it will not because there
are no free lunches in this world.
Is it a large amount? At the national average, $6 per home. You
have all the figures before you. The copyright bite works out to $1.80
per home per year for the 2.5-percent rate, which is irrespective of the
number of signals carried.
In the seven congressional districts of this conmiittee, there are ap-
proximately 73,000 cable homes. Under this bill, these 73,000 homes
could pay to copyright holders up to $131,400 this year.
So, do the television viewers care? CATA has already received
more than 200 community resolutions opposing this viewing tax, from
cities as diverse as Eau Claire, Wis. and Granville Village, N. Y.
These resolutions from municipalities will be supplied for the record.
Further, the U.S. Conference of Mayors and the League of Cities has
also_ adopted a joint resolution in 1974, unanimously opposing the in-
clusion of CATV in the copyright bill. The message, I believe, is that
the constituents are concerned about higher CATV charges that will
result from copyright legislation.
The third question concerns to whom copyright payments would be
made. Mr. Jack Valenti, president of the MPAA, told Senator
McClellan's committee on the Judiciary on August 1, 1973, that he
also represents something called the Committee of Copyright Owners,
composed of eight independent suppliers of copyrighted television
programs, which are listed in my text. Mr. Valenti testified:
The programs supplied by members of CCO to stations, and thereby to cable
systems, constitute by far the largest part of all copyright programs carried by
television and cable.
In a CATA study of programs broadcast in New York City during
a recent week in the month of March we found that 46 percent of all
copyright-on-file evening programs on CBS are in fact owned by those
57-786 — 76 — pt. 1 40
618
eight ceo firms; similarly, 32 percent for NBC, and 17 percent for
ABC.
Finally, we also checked movie copyrights on file for that week in
March of this spring, and it was reflected that 51 of the 68 movies — 60
percent — were owned by one of these eight firms. Clearly, Mr. Valenti
is correct about his employer's position.
But, to make the analysis and our point more clear, please consider
that the largest copyright owner of the big eight — MCA — had gross
revenues in 1974 of $641 million, a third more than not the largest cable
company, but all cable companies ; the whole cable industry.
Given the current state of economic affairs in our cable industry, we
are indeed saddened that we were not the first in thinking of a relief
act for our industry, a royalty from program suppliers to CATV for
aiding viewers to see their programs. Program suppliers, we feel,
clearly can afford to pay.
Thank you.
Mr. Kastenmeier. Before yielding to Mr. Pattison I just have a
clarifying question. In terms of constituent members, does CATA
differ from NCTA?
Mr. Cooper. You mean is there an overlapping of membei-ship ?
Mr. Kastenmeier. Are the operators more or less, characteristically,
the same, as far as size ?
Mr. Cooper. I have never seen an analysis of that, I can give you an
expression from my own experience. The impression would be, "No."
Typically, our operators tend to be smaller and dependent in the sense
that they probably own a couple of systems as opposed to multiple
systems.
]Mr. KIastenmeier. They tend to be smaller in terms of operations ?
Mr. Cooper. They tend to be smaller in terms of operations, and in
terms of subscribers, the area they serve. They are more rural, as a
consequence.
Mr. Kastenimeier. Does the type of retransmission that they engage
in, would that be substantially different from NCTA members ?
Mr. Cooper. I don't think substantially, no, sir.
Mr. Kastenmeier. One other question. Does the view of your organi-
zation differ from the ad hoc committee on cable television ?
Mr. Cooper. I am not aware of any significant difference, no, sir.
Mr. Kastenmeier. I yield to the gentleman from New York, Mr.
Pattison.
Mr. Pattison. I just want to thank Mr. Cooper for his statement ; it
certainly provides us with the other side of the coin, and gives us a real
different philosophical point of view that we obviously have to con-
sider. I have no questions about the statement.
Mr. Kastenmeier. The gentleman from Massachusetts, Mr. Drinan.
Mr. Drinan. Just one question, Mr. Cooper. On what do you base
your conviction here, that you expressed so well, that copyright is not
due. Do you go back to the Supreme Court opinion, or how, ultimately
do 3^ou do it ?
Mr. Cooper. I think basically the Court said in its two opinions what
we have always believed as a group of operators ; and we believe in the
language of and subsequent court, many, many Court decisions inter-
preting, perhaps, the section of the Constitution that deals with copy-
right.
619
Mr. Drinan. And you believe that all these people have deviated
from what you believe to be the law simply because they worked out
the consensus agreement, and it is politically expedient for them to go
that way ?
Mr. Cooper. I think that is what they say, and I have to agree. Tliat
is their analysis why they are where they are ; yes, sir.
Mr. Drinan. Well, now, just a clarifying one last question. Do you
think that any part of cable television, under any circumstances, should
be required to pay copyright fees ?
Mr. Cooper. Sir, I think we almost need to talk about the definition
of cable television. If we are talking only about a system that receives
broadcasts from off-the-air sources, and supplies those broadcasts to
its customers, then my answer to you is, no, we can't see any area, any
geographic center of operation, any size of system, any dollar economic
grovsi^h revenue determination of system that to us makes any sense
that should be liable for copyright, based upon our philosophical view
that is set forth here.
However, if a system, a f mictioning operating system wishes on its
own to serve the needs of its community to procure for display only on
the cable movies, sporting events, and other events that are not gen-
erally available off the air to broadcasting, then I am sure that they
must and should enter the normal marketing mechanisms, and pay
their proportionate percentages of copyright fees, just as any originat-
ing transmitting facility should do.
Mr. Drinan. All right, thank you for your statement.
Mr. Kastenmeier. The gentleman from California, Mr. Wiggins.
Mr. Wiggins. Well, first, Mr. Cooper, I want to compliment you for
corning out swinging. You have stated the other side of the coin, as you
indicated, not only objecting to any imposition of copyright fees, but
suggesting that you ought to be paid for expanding the market of the
originator.
Youhave just answered a question which suggests to me that you do
not object conceptually to the whole idea of copyright. Do you affirm
that?
Mr. Cooper. By conceptually, I guess we are talking about the consti-
tutional conception of copyright as a means of making available to the
public ?
Mr. Wiggins. Well, it is a two-edged sword. The language which you
indicated, indicates the policy of making available to the public ; and
then the framers of the Constitution, I believe, added to the language,
"by securing for a limited time to authors and inventors the exclusive
right", and so forth.
So, I think it is fair to say the Constitution contemplates some
mechanism for securing those rights, and we do so in the payment
schedule.
Mr. Cooper. I agree.
Mr. Wiggins. You conceptually agree to that. And you would apply
it to cable in the sense of cable-originated programs, not simply trans-
mitting someone else's signal.
You make a case that the payment is not due, and support that posi-
tion in part by the argument which relates to payment of the royalty
by the viewers, as opposed to putting that economic burden on the
advertisers ; is that correct ?
620
]Mr. CoopEE. That is correct.
Mr. Wiggins. Well, it seems to me that this notion of advertisers'
paying the royalty is almost unique to the television industry, and
perhaps to radio. But, if you get away from those and talk about
books, for example, the author is paid by the reader — ^the analogy
being to the viewer. Indeed, you can carry that analogy quite a ways,
and it seems that television, and perhaps radio are unique in the sense
that someone else picks up the tab ; is that not so ?
Mr. Cooper. Yes.
Mr. Wiggins. Well, then we shouldn't place too much emphasis on
the notion that the viewer may ultimately have to f)ay as a reason for
rejecting the payment of copyright by a cable television, should we ?
Mr. Cooper. Well, I think that is probably a political decision.
Mr. Wiggins. No, I am not thinking about it politically. I am trying
to get some evenhanded treatment of those who exploit for profit the
protected works of authors and inventors.
Well, I am going to reread your statement carefully, Mr. Cooper
because it is a threshold question that we have to come to grips with,
whether you should pay anything. Tliat is a difficult question on which
you have strong views. But we only get to the question of the tribunal
and the rates if they get past the threshold. Thank you for raising the
issue.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson. I have very little to add to what has already come
forward here. I just want to be sure I understand the thrust of your
presentation. I think I do, and that is, it is your position that the cable
should pay no royalty except in those situations where it originates its
own program, and then of course it would be on a negotiated basis, I
suppose, with the owner of the copyprighted material.
Mr. Cooper. That is correct.
Mr. Danielson. And the items you pick off the air and transmit to
your subscribers that are things that are already disseminated, it is
your position that a cable is to serve as sort of an amplifier for the eyes
and ears of the viewer, and you are simply enabling the viewer for a
subscription fee to see and to hear the programs that are already
broadcast by someone else.
Mr. Cooper. Yes, sir. I think what we are really doing is fulfilling a
mandate that is stated in the Communications Act, to provide the
widest possible dissemination.
Mr. Danielson. Well, that may be a legal effect of what you are
idoing. What you are doing is to sell to your subscribers a service and
enable them to see and hear things which they couldn't otherwise see
and hear.
Mr. Cooper. We are selling to him, if you will, the utilization of our
amplifiers and our cables ; yes, sir.
Mr. Danielson. Thank you very much.
Mr. Kastenmeier. Mr. Drinan ?
Mr. Drinan. You mentioned the seven congressional districts of this
committee, and this is of interest to me. There are approximately
73,000 cable homes. That is collectively, in all seven ?
Mr. Cqqper. In all seven districts, tliat's correct.
Mr. Drinan. If counsel could furnish that to each of the seven
(members, I am sure they would be as interested as I am.
Mr. Cooper. We certainly will, sir.
621
Mr. Kastenmeier. The gentleman from Illinois, Mr. Railsback.
Mr. Railsback. Mr. Cooper, do you think the networks ought to
have to pay to run movies that have already been made public? In
other words, if I pick up an old movie, do you think a network should
have to pay a fee for copyright? Or, for that matter a station like
WGM, which is a nonnetwork station. Do you think that a network,
or an independent television station ought to have to pay a fee ?
Mr. Cooper. Well, the point is, it is in the public domain for the first
time
Mr. Railsback. So, they are perpetuating, then, the Federal Com-
munications Act.
Mr. Cooper. Yes.
Mr. Railsback. Should they have to pay for running that movie?
Mr. Cooper. I have trouble between a fee and
Mr. Railsback. For the copyright, I'm sorry.
Mr. Cooper. Okay.
Mr. Railsback. They are disseminating a creative work to the
public.
Mr. Cooper. Yes, sir.
Mr. Railsback. Just like you are doing.
Mr. Cooper. No, not just like it.
Mr. Railsback. Maybe not just like, but they are disseminating it.
What I am asking you is, should that network have to pay a fee?
Mr. Cooper. All right, they are disseminating this movie, program,
whatever it might be into and through the public domain from its
airway, for which they are receiving revenues. Yes, they should.
Mr. Railsback. They are receiving revenues from their advertisers.
Mr. Cooper. Yes, sir.
Mr. Railsback. You are receiving your revenues from your viewers.
Mr. Cooper. That's correct.
Mr. Railsback. I have trouble seeing the difference, could you give
me your reasoning? Wliy should you not have to pay?
Mr. Danielson. Will the gentleman yield ?
Mr. Railsback. Yes.
Mr. Danielson. I think the gentleman pointed out here at one
point, the broadcasters are actively broadcasting this copyrighted
material ; the cable system is passively
Mr. Cooper. Delivering it.
Mr. Danielson [continuing]. Receiving it, I think that's it.
Mr. Railsback. But, 1 just don't understand the logic where the
network on the one hand is acting as an information disseminator and,
on the other hand as a program originator where somebody else has
produced, and actually has to buy that performance, or pay a fee, or
pay a copyright, or buy the copyright. I have difficulty seeing where
in that case
Mr. Cooper. I think I can answer it for you.
Mr. Railsback. Go ahead.
Mr. Cooper. Their cost of doing business runs the gamut from elec-
tricity to the power and all this business, right ?
Mr. Railsback. Right.
Mr. Cooper. All right. The minute that signal leaves the trans-
mitting tower it's in the ether, as it were ; it's in the atmosphere, in
the public domain. Their cost of delivery of the signal stops the
57-786 O- 76 - pt. 1 - 41
622
minute, the instant that signal radiates from the transmitting tower ;
will you accept that ?
In other words, as soon as they release it it's gone and they have
no more expense involved in the delivery of that signal.
Mr. Kailsback. Yes; they don't deliver it by cable, they deliver it
by other means.
Mr. Cooper. That's correct.
Mr. Eailsback. That is a different system.
Mr. Cooper. Well, not necessarily. On the other hand, our expense
only begins where their expense stops.
Mr. Railsback. But they don't charge viewers, do they ?
Mr. Cooper. We did a very interesting study on that a few months
ago in which we pointed out that based upon the gross receipts of all
television stations of all markets in the country we can very quickly
determine a cost per household per year ; a cost based upon increased
costs for all goods and services that were for sale in the marketplace,
which included a percentage for advertising cost, half of one percent
for Coca-Cola, for example.
If you do this, you very quickly determine that there is some place
between $21 and $50 a year per home, is the average cost, nationwide,
that we all pay, we all share it, for the broadcasting service that exists.
Mr. Railsback. You know, what really bothers me and this may
not be analogous, but we have sat through record piracy hearings
where we have received testimony from record companies to the effect
that they have to pay rather substantial costs to invest in a particular
production. Then certain people pirate that work product, and sell it
at a reduced cost. They have gotten the benefit of that capital invest-
ment, and the cost of producing that work and they make a big profit.
Now, I have difficuty. I see you charging the individual viewer,
and I see the networks using advertisers, and I see you both dissemi-
nating creative works, which is in the public interest. But to me it is
not logical for them to have to pay for copyright, and you do not.
Mr. Wiggins. Will the gentleman yield ?
Mr. Railsback. Yes.
Mr. Wiggins. Would it make any difference if your reception of
the signal were taped by you and rebroadcast at your convenience?
Mr. Cooper. Would it make a difference philosophically ?
Mr. Wiggins. In terms of your viability for copyright payments.
Mr. Cooper. I would expect it would, yes, sir.
Mr. Wiggins. What is the difference, other than time ?
Mr. Cooper. I think there is a very significant difference, the time of
showing, the fact that it is not a simultaneous release.
You see, the cable company — and this is an argument that goes back
to 1954, that the cable companies participate in the programinsf and
scheduling of the releases that they show upon their system. Well, the
factual matter is, we do not. The disseminator, the television broad-
cast station showing the movie that you refer to, he picks everything
tliat goes in it, the contents. We have absolutely no choice over it. His
expenses absolutely stop the minute that signal is broadcast, whereas
ours only begin at that point. He gets a free ride through the federally
regulated airways of which there is only a limited quantity available,
and we must therefore share those airways, so it's not creating a
problem.
623
Mr. Railsback. That free ride is very, very tightly regulated.
Mr. Cooper. That is correct. And I assure you, sir, on the other end,
we are even more tightly regulated by the Federal Communications
Commission for our "free ride" to our actual cable.
See, a broadcaster, take a total capital plant investment of — to pick
a round number — $1 million for a million homes, $1 per home. You
can't even begin to touch service to a real or potential cable television
home for less than $100, or $150 per home invested, going in, to start
with. That is because we have a very high expense of delivering the
signal from our head-in, if you will, or tower, to the individual home.
We don't have free rides on the waves, we don't have free easements, we
must pay a local franchise fee tax. The rights-of-way where we string
our cables are the same to us as the broadcaster's either through which
he transmits from his transmitting tower on top of the Sears Building,
except that we have to pay money, we have to pay a substantial amount
of money and have a very high risk involved in maintaining our trans-
mission medium; he has none. His stops the minute his signals goes
into the public airways.
Mr. Kastenmeier. I have just one last question to follow up on
several questions that have been asked. Do I understand you correctly,
INIr. Cooper, that you feel that CATV should not have to pay a copy-
right fee unless there might be certain other conditions, for example,
if he originates; if he tapes and retransmits; if he sells advertising,
if he does a series of other things than simple retransmission, extem-
poraneous, then, are you conceding that you might have to pay a
copyright ?
Mr. Cooper. I think on a point-by- point basis, what we are really
talking about in terms of conceding that copyright could and should
be paid is specifically on the pay television aspect of our industry where
a movie specifically is bought and then shown on the cable.
Mr. Danielson. If I may interrupt. You mentioned pay television.
If you originate, if you just simply put Bambi on the cable, whether
you charge individually for it, or not, do you see any reason why you
should not pay copyright, if you originate ?
Mr. Cooper. If I have procured Bambi, or the rights to show it on
the open market
Mr. Danielson. If you originate, put it on your cable-
Mr. Cooper. Should I pay copyright for showing Bambi ?
Mr. Danielson. Yes.
Mr. Cooper. Absolutely, sir.
Mr. Danielson. It isn't a matter of whether you charge your sub-
scribers, but if you put it on your cable, you should pay.
Mr. Cooper. Many systems have a 24-hour movie channel. That is
not something you pay extra for, that is just part of the service.
]Mr. Kastenmeier. Getting back to my question, what I am trying to
establish is that if cable systems involve themselves in certain activi-
ties— which some of your members must — then to that extent they
might, you concede, owe a copyright. So, it isn't a flat no-copyright-at-
all situation, but no copyright if, or unless a cable system involves itself
in certain aspects.
Mr. Cooper. No copyright payment for signal transmission, is, I
believe what we are saying. I don't like the word "retransmission," but
everybody uses it.
624
Mr. Kastenmeier. But the fact of life is that increasingly cable
systems do much more than simple retransmission.
Mr. Cooper. And they do pay for it now, sir, when they are out
buying Bambi to show.
Mr. Kastenmeier. It is a rather mixed situation, it isn't quite as
black and white.
Mr. Cooper. That is exactly right, exactly right. They do pay for it
now when they show Bambi.
Mr. Drinan. One more question. I wonder, sir, if you have statutory
language, what would you substitute for 2223, the relevant sections?
If you would have that prepared, I think that would give me, at least,
a better idea.
Mr. Cooper. I can submit that to you.
Mr. Drinan. Thank you.
Mr. Cooper. Thank you,slr.
Mr. Kastenmeier. Mr. Cooper, I want to compliment you on your
presentation here this morning, we appreciate it.
Mr. Cooper. Thank you, sir.
[The prepared statement of Robert Cooper follows :]
Statement of Robert Cooper, Executive Director, CATA
Mr. Chairman, and members of the subcommittee, I am Robert Cooper, Execu-
tive Director of CATV.
'CATA, the Community Antenna Television Association, is a trade association
organized in 1973 that today has as members some 400 CATV systems throughout
the United States. Originally organized to focus on proposed copyright legislation,
CATA has broadened its membership and scope of activities to include such
matters as participating in FCC proceedings. Generally stated, CATA's philoso-
phy recognizes that the roots of CATV lie within the community — hence our
name, a name abandoned in the 1960s by our immediate predecessors in testimony.
We are not here to pull punches or present diplomatic truths — just real
truths. Nor will we play a lengthy numbers game. By a numbers game. I mean
statistics on who does or does not support this bill. However, you should know
that some 25 state and regional associations have voted against the NCTA
position. And you can count on the fingers of one hand the state and regional
associations still supuorting the NCTA position. Furthermore, the Pennsylvania
State Association and the NCTA's largest single member company, TelePrompTer,
have requested and received time on their own to present views contrary to
NCTA. TelePrompTer and tlie Pennsylvania systems serve over two million
homes. These statistics reveal only conclusions, not reasons. We submit that
the only reason CATV copyright presently has any support is not because the
copyright-supporting splinter of the industry believes that CATV should pay ;
but because it is politically expedient to do .so and because of something called
the consensus agreement. The NCTA, NAB, and MPAA can try to explain that
agreement to you. For our part, we will concentrate on the merits of the copyright
issue.
ICATA is here today because its membership does not believe that the motion
picture industry is entitled to place its hands in the pockets of CATV operators
or CATV subscribers. We reject the joint copyright position of NCTA-NAB-
MPAA that CATV owes reasonable copvright.
The imposition of copyright on CATV is. in part, a tax on the viewing public.
It is also a deception to an American television-vieA^ing public which has been
told time and time again of the benevolence of broadcaster-delivered "free tele-
vision". As we all know, it is not a free system — ^it is an advertiser-supported
system which means we all pay once for the programs we watch by paying
higher prices for television-advertised products. Also, approximately ten million
households must pay a second time to actually receive television signals or clear
pictures by subscribing to CATV. And now. through copvright legislation, they
will be asited to pay yet a third time. Remember, CATA'' probably would never
have come into existence if the FCC had fastidiously followed the Congressional
mandate of Section One of the Communications Act "to make available, so far
625
as possible, to all the people of the United States, a rapid, efficient, nation-wide,
and world-wide wire and radiocommunications service." Yet, twenty-five
years after the FC€ commenced fumbling with television allocations, two million
households or 3 percent of all homes, receive absolutely no over-the-air television
signals. It is estimated that over ten million homes, or 15 percent of the popula-
tion, do not receive the three national network signals «ofif the air. It is CATV,
however, that over the last 25 years has filled gaps in the FCC's allocations
voids and lent a boost to UHF television in tandem with your all channel receiver
law.
It is antithetical, then, to your Communications Act purposes to saddle CATV,
and through it, the American television-viewing public with a tax for the privilege
of watching.
Copyright is a creation of the legislature under a constitutionally delegated
power: "To promote the progress of science and useful acts by securing for
limited times to authors and inventors the exclusive rights to their respective
writings and discoveries."
Also under the Constitution, you have specifically been delegated power to
make laws affecting interstate commerce and have done so vis-a-vis broadcasting
by passage of the Communications Act. Today, the Communications Act and
Copyright Act are in a state of apparent tension. I say apparent because the
program suppliers would have you believe that the main purpose of copyright
is to give authors money so that they will have incentive to write. Not true.
The main purpose is not to reward authors, but to insure that creative works
find their way to the public. The Supreme Court has pointed out that in economic
terms, copyright grants are made in "the connection that encouragement of
individual effort by personal gain is the best way to advance public welfare. * * *"
Thus, the tension dissolves when it is realized that Congress has also established
a Communications Act and created the FCC to fulfill similar, if not identical,
purposes : those being to secure the general benefits of radio and television pro-
gramming to all the people of the United States and to encourage their larger
and more effective use in the public interest. In these stated purposes, it is in-
conceivable that the FCC's own general counsel could testify before you that
CATV should pay just because the argument has been around for a long time.
We submit that if the FCC testifies in support of copyright, it ought to relate
that testimony to some area of concern within its jurisdiction. If Mr. Hardy
desires to see resolution of the issue merely for the sake of resolution, his
desire can be accommodated just as well by deleting CATV from this bill.
There are other voices in and out of the CATV industry who say that "the
copyright issue must be solved — it must be put behind us, because until it is laid
to rest, the investment community will not advance the capital required by cable
to expand and grow."
"We have no quarrel with this line of reasoning, except when it is expanded to
the illogical conclusion that the industry should simply pay copyright merely
to expedite the removal of this uncertainty when CATV's future is better served
by the removal of CATV from copyright legislation.
And then, there are voices in our industry who say "We can afford to pay" with
remarks like "What is one or two or 2% percent of our gross?" Let me tell you
what it is.
In December, 1973, CATA turned into Senator John McClellan an economic
study of more than 250 CATV systems, ranging in size from 40 subscribers to
5,800 subscribers. In that study, which we will submit for the record, CATA found
that in the singular "rate" level of one percent of gross proceeds to copyright
that, among other breakdowns by system size, systems of 1,001-1,500 subscribers
would experience reduction of net revenues of 13.8 percent.
Frankly, the industry cannot afford to pay and that is the truth. Lest this be
considered solely a pitch for a small system exemption, that is, a flat dollar
exemption, such as $100,000, it is not. For copyright will adversely affect larger
systems, including multiply owned systems.
We also regard as fundamental considerations the following questions which
should be asked of every proponent of copyright liability for CATV :
1. Why should this industry pay?
2. Who will really pay?
3. Who will receive the payments?
CATV should not pay copyright because there is no debt owing. There are
hundreds of thousands of hospital rooms in this country offering television
service at a price. Patients rent a television set and the set supplier, the hospital,
626
and maintenance man profit. Rates are as high as $3 a day. There is an unmolested
industry — hospital television — possibly with gross revenues exceeding CATV.
Why are they not in the copyright bill? Because they are providing the service
of facilitating television viewing. The Supreme Court has twice held that the
same rationale applies to CATV. These cases are instructive. First, one must lay
aside the program-supplier sponsored line that the cases are irrelevant because
they dealt with the 1909 Copyright Act. Of course, the Supreme Court was dealing
with a 1909 Copyright Act. But they said, in Fortnightly that the decision was
made "with due regard to changing technology. * * *", i.e., not based on 1909
concepts. The Court held ; "* * * mere quantitative contribution cannot be the
proper test to determine copyright liability in the context of television broad-
casting. If it were, many people who make large contril)utions to television viewing
might find themselves liable for copyright infringement — not only the apart-
ment house owner who erects a common antenna for his tenants, but the shop-
keeper who sells or rents television sets, and, indeed, every television set manu-
facturer. Rather, resolution of the issue before us depends upon a determination
of the function that CATV plays in the total process of television broadcasting
and reception."
The Court reasoned television viewing was a combined activity of broadcasters
and viewers ; that broadcasters perform and viewers do not ; broadcasters are
active performers and viewers passive beneficiaries and CATV "falls on the
viewer's side of the line."
The Court concluded as a matter of separation of powers — not as a matter of
copyright policy — that the job of accommodating "various competing considera-
tions of copyright, communications, and antitrust" belonged to Congress. The
Court did not intend that Congress, in fact, adopt CATV copyright liability.
Then came TelePrompTcr-CBS, where the Court was faced with microwaved,
long-distance signal importation — more than 450 miles — by CATV systems that
also originated their own programs, also sold local advertising and interconnected
with other systems. It was contended that this entire package moved CATV
to the broadcaster side of the line. The Court found no copyright significance to
the other CATV activities and found that the distance that signals travelled did
not "alter the function [CATV] performs for its subscribers." The Court stated:
"When a television broadcaster transmits a program, it has made public for
simultaneous viewing and hearing the contents of that program. The privilege of
receiving the broadcast electronic signals and of converting them into the sights
and sounds of the program inheres in all members of the public who have the
means of doing so. The reception and rechanneling of these signals for simul-
taneous viewing is essentially a vieiver function, irrespective of the distance be-
tween the broadcastinff station and the ultimate viewer." (Emphasis added.)
Mr. Chairman, members of this committee, two points: (1) When a television
station broadcasts, the broadcast is in the public domain; (2) The Supreme
Court's characterization of what CATV does is as true today as it was when
the Court made its decision. What CATV does — its viewer function — is not
altered by the words of the 1909 Act or H.R. 2223.
Those advocating CATV liability have a high burden of persuasion because
CATV fulfills Communications Act goals by making television more widely
available or available for the first time. It is a viewer-oriented medium, as are
translators, master antennae, rooftop antennae, and television sets themselves.
None of these entities are prospectively liable for copyright under your bill. None
should be, for they are all part of the process of nationwide dissemination of pro-
gramming that you have legislated in the Communications Act.
In TelePrompTer-CBS, the copyright holders argued that CATV prerelease of
programs (which would not apply to network television) would dilute the profit-
ability of reruns and other syndicated properties, thus removing incentives to
produce television programs. The Court rejected this argument. It recognized
that the appropriate nexus was missing, that is, copyright holders do not receive
money from the ultimate user — the television viewer — but from the advertisers
"who use the drawing power of the copyrighted material to promote their goods
and services."
The Court recognized : that distant signal carriage does not interfere with the
"copyright holders' means of extracting recompense for their creativity and
labor" ; and that, in fact. CATV provides a larger viewer market (to the benefit
of both the advertiser and copyright holder) .
We submit that CATV should not pay because it does not owe. Copyright holders
are paid by advertisers, not currently, and hopefully, not in the future, by viewers
or by those that help the viewing process — CATV systems.
627
This leads to the second question — who will really pay. There is no doubt that
your imposition of copyright on CATV would be, at least in part, a consumer tax
on television viewing. Some have difficulty with the word "tax". But it is a form
of territorial taxation, that is, a special television viewing charge to be paid only
by cable viewers. lUust the viewer himself pay it? It could stop at the cable
company. But it will not because there are no free lunches. Is it a large amount?
At the national average cable charge of $6 per month per home, the copyright
bite is $1.80 per year — for the 2.5 percent rate, irrespective of number of signals
carried.
In the seven Congressional districts of this Committee, there are approxi-
mately 73,000 cable homes. Under this bill, these 73,000 homes could pay to
copyright holders up to $131,400 per year.
What about the television viewers? They care, too. We have already received
more than 200 community I'esolutions opposing this viewing tax from cities as
diverse as Eau Claire, Wisconsin, and Granville Village, New York.
These resolutions from municipalities will be supplied for the record. Further,
the United States Conference of Mayors and the League of Cities also adopted
a joint resolution opposing the inclusion of CATV in the copyright bill. Your
constituents are concerned about higher CATV charges that will result from
copyright legislation.
The third question concerns to whom copyright payment would be made. Jack
Valenti, pre.sident of the MPAA, told Senator McClellan's Committee on the
Judiciary on August 1, 1973, that he represents the Committee of Copyright
Owners, composed of eight independent suppliers of copyrighted television pro-
grams: (1) Columbia Pictures Industries, Inc. ; (2) Metro-Goldwyn-Mayer, Inc. ;
(3) Metromedia Producers Corporation; (4) Paramount Pictures Corporation;
(5) Twentieth Century Fox Film Corporation: (6) United Artists Corporation;
(7) MCA, Inc.; and (8) Warner Brothers, Inc. Mr. Valenti said: "* * * the
programs supplied by members of CCO to stations, and thereby to cable systems,
constitute by far the largest part of all copyright programs carried by television
and cable. * * *" CATA has completed a tabulation of copyright registrations
for television programs broadcast in New York City during a recent week.
Of all program hours telecast by the three networks in New York City, be-
tween 5 :00 p.m. and 11 :30 p.m., in the sample week :
46.15 percent of all copyright-on-file program time on CBS was owned on record
by one of these eight CCO firms ; similarly, 31.58 percent for NBC ; and 16.67
percent for ABC.
Finally, movie copyrights on file for that week reflected that 51 of 68 movies
(60 percent) were owned by one of these eight firms. Clearly, Mr. Valenti is
correct in his analysis of who owns copyright. Bvit to make the analysis and our
point more clear, please consider that the largest copyright owner of the big
eight — MCA — had gross revenues in 1974 of $641 million — a third more than not
the largest cable company, but all cable companies — the whole cable industry.
Given the state of economic affairs in the cable industry, we are indeed saddened
that we were not first in thinking of a relief act for our industry — a royalty from
program suppliers to CATV for aiding viewers to see their programs. They can
clearly afford to pay.
Mr. Kastenmeier. Our next witness is Mr. Frederick W. Ford,
counsel for the Ad Hoc Committee of Concerned Cable Television
Operators for a Fair Copyright Law. Mr. Ford, would you like to
introduce your colleagues ?
TESTIMONY OF FREDERICK W. FORD, COUNSEL, AD HOC COMMIT-
TEE OF CONCERNED CABLE TELEVISION OPERATORS FOR A FAIR
COPYRIGHT LAW
Mr. Ford. Mr. Chairman and members of the committee, I am
Frederick W. Ford, a member of the Washington law firm of Pittman
Lovett Ford & Hennessey, with offices at 1819 H Street NW. I appear
here today on behalf of the Ad Hoc Committee of Concerned Cable
Television Operators for a Fair Copyright Law to suggest an amend-
ment to the bill and to support passage of the bill, as amended.
628
Accompanying me are Ben V. Willie of Iowa ; C. Warren Fribley
of New York ; Lawrence Flinn of Connecticut, and George Gardner
of Pennsylvania.
I have conceded 5 minutes of the time alloted to me to Teleprompter
Corp., which is the largest owner of cable television in the country. I
have, therefore, cut my statement rather drastically. I would like to
have the entire statement incorporated in the record, because I will
eliminate large parts of it in order to confine myself to the allotted
time.
Mr. Kastenmeier. The chairman appreciates that, Mr. Ford, and
without objection the 17-page statement and the appendixes will be
received for the record.
Mr. Ford. The ad hoc committee opposes the payment of copyright
on the community antenna function, and suggests an amendment to
the bill to eliminate copyright liability of community antennas for
carriage of television signals. That suggested amendment is contained
in footnote 5.
The ad hoc committee does not view the matter of copyright pay-
ments as an issue between it and the Office of Copyrights, the copy-
right owners, the NAB, AMST, or NCTA, because none of them will
pay copyright, only the public ultimately pays copyright on television
programs. The issue here is between the copyright owners and the
subscribing members of the public to community antennas.
The issue is as follows : Should the Congress, contrary to the reason
and logic of the U.S. Supreme Court, on two occasions, create the
legislative fiction that CATV is engaged in the display or perform-
ance of a copyrighted work publicly and is, therefore, liable for the
payment of copyright fees which, of course, it would have to collect
from the public as a part of its antenna service ?
The public should not be required to pay a second copyright fee
for the same program because of the type of antenna it uses.
The Office of Copyrights makes its case for CATV copyright liability
on the fact that CATV charges its subscribers a fee for its antenna
services which makes a profit and failure to share these profits could
damage the copyright. The Supreme Court disagreed with these
assumptions and found otherwise in TelePrompTer C orporation v.
GBS, 415 U.S. 394 (1974). If the Office of Copyright's theory of
liability is correct — which it is not — then anyone who makes a profit,
directly or indirectly, from a performance of a copyrighted work
should be liable. This liability would run to wire and receiver manu-
facturers and countless other business enterprises which enable the
public to view the performance.
CATV services keeps the copyright owner honest by delivering
the signal carrying his program to the public for which he has been
paid.
At the present time, a sponsor who buys a program usually pays the
copyright owner for one performance over one or more stations.
The sponsor pays the copyright owner, directlv or indirectly, for
tickets to the show for everyone within the grade B contour of the
stations televising it and as far beyond that contour as it can be
received. This cost is passed on to the public eventually in the purchase
price of the product-
629
It is a scientific fact, recognized in the Sixth Keport and Order,
however, that over average terrain only 90 percent of the locations in
the grade A contour receive an adequate signal 50 percent of the time,
and within the grade B contour only 70 percent of the locations receive
an adequate signal 50 percent of the time. I will venture that most
sponsore paying for a program think they are getting a potential of
100 percent of the locations 100 percent of the time, but that just isn't
so, even though the copyright owner is probably collecting for 100
percent of the locations 100 percent of the time.
A community antenna television system within the grade B contour
merely aids the sponsor in getting his money's worth from the copy-
right owner and the station by assuring the sponsor that anyone who
desires the signal will receive it clearly, and thus increase the potential
audience. Certain copyright owners are not satisfied with this. They
collect from the sponsor who recovers his cost from the public and
they would like to collect again from the CATV operator who must
also pass his cost on to the public. Some way or other it does not seem
right for the public to have to pay for "two tickets to the same per-
formance." No one has attempted successfully, to my knowledge^ to
refute this argument. They merely ignore it and talk about something
else.
Cable television or its advertisers will pay for any copyrighted
program it originates, whereas the public would receive nothing for the
cash the broadcasters would have the copyright owner siphon from
the public via CATV which otherwise could be used for copyright
fees for more diverse programing.
There is a basic conflict between communications policy and any
copyright law in which a cable antenna system is required to pay
copyright on any signal it is authorized to receive and distribute on
its system by the Federal Communications Commission.
The proposed legislation would compel CATV to pay copyright
owners for distributing signals carrying their copyrighted works. The
broadcaster has the right to pick and choose the copyrighted works
he will buy and broadcast.
Congress should set the record straight. If the Commission is con-
firmed by Congress in the power to require carriage of particular sig-
nals by CATV, then CATV will remain a supplemental reception serv-
ice, perform nothing, and owe nothing.
If it is desired to require copyright payment by CATV for its sup-
plemental role, then CATV should be entitled to carry whatever pro-
grams it desires, delete the advertising, and substitute its own. This
is strictly a communications policy question. The broadcaster should
not be permitted to have it both ways — collect additional revenue
from sponsors for the added carriage oif CATV and require CATV to
pay copyright fees.
in short, the broadcaster is arguing for the morality of unjust en-
richment to copyright owners at the expense of the public CATV
serves, as a means of using copyright to restrict the growth of CATV.
It is the public who will unjustly enrich the broadcaster and/or the
copyright owner, not the CATV operators. These anti-consumer pro-
visions should not be enacted into law.
We urge the Congress not to compromise the fundamental legal
principles established by the U.S. Supreme Court on two occasions.
630
decisions that are on the side of the viewer. The broadcaster, whatever
his motives are, is wrong in trying to saddle its viewers with extra
copyright payments to view its "free" programs through use of a more
efficient rented antenna.
Imposing copyright fees on the conmiunity antenna function and,
in ett'ect, making tlie American public pay tribute twice to the 28
corporations in New York and Hollywood that own substantially all
of the copyrighted material on TV, to watch '"free TV" is wrong. If
the copyright ow^ners or merchandisers exercise forbearance on
the short-term profit of double payment and permit cable television to
flourish, they will be amply rewarded w^ith even greater profits from
the insatiable requirements of cable television for material to fill its
many origination channels in the years to come.
The Commission's power to limit the number of distant signals im-
ported by microwave has been confirmed. No further power is needed
to protect the copyright owner and the public interest.
Now that the "unfair competition" shibboleth has been discredited,
the only bases for contending that CATV should pay copyright are:
One : That it makes a profit from the use of copyrighted material,
and
Two : That it really does engage in public performance for profit.
Neither one of these positions are sound. There is no principle of
copyright laAV which assesses liability for co]:»yright based on profit
alone and certainly none exists in the pending bill.
As to the display or performance of copyrighted works publicly by
community antennas, the complete answer is that a reception antenna
does not perform. The cable operator does not convert the electronic
signal into pictures and sound — he merely delivers a signal to the
subscriber who furnishes his own equipment to convert the signal
to pictures and sound in order to receive and view the performance.
The CATV operator does not use or sell any program or the peform-
ance thereof either publicly or ]:)rivately. A CATV operator sells a
receiving antenna service, just as a manufacturer sells a receiving
antenna from which he makes a profit. But, community antennas do
not perform anything.
Despite the FCC's push for copyright liability, the copyright law
is not the place to byj^ass the Commerce Committees and embed
regulatory flexibility in concrete. The Senate Commerce Committee
in its report on S. 1361 stated that "it believes that in view of the
potential impact of certain provisions in S. 1361 on our nationwide
communication service, ample opportunity should have been afforded
it to consider those i:)rovisions in-depth and to have held hearings on
the communications issues."
Certainly, CATV should be eliminated from this bill, if for no
other reason than to permit the Commoi'ce Committees to develop a
national communications policy on cable television before any copy-
right policy on the community antenna function is undertaken.
Based on the foreofoing review of the li^ackground and the provisions
of this legislation, it nnist be concluded that the ]iro visions of H.R.
2228 concerning CATV are philosophically unsound. An across-the-
board ]>ayment, including pavment by the pul^lic for two tickets to the
same performance or for distant signals as limited by the Commis-
sion's rules, is, in our opinion, soaking the consumer.
631
We believe that this subcommittee is justified and should adopt the
community antenna industry's historical position by amending this
bill to eliminate any copyright liability for the community antenna
function, under section i()(3 or other provisions of H.E. 222iJ, but not,
of course, the origination function of cable television systems for
which it should be liable like anyone else.
Thank you.
Mr. Kastenmeier. Thank you, Mr. Ford. The Chair yields to the
gentleman from Xew York, Mr. Pattison.
Mr. Pattisox. I have no questions. It seems to me that this state-
ment is basically — there are no substantial disagreements between your
position and the position that was stated just a few minutes ago.
Mr. Ford. Well, I haven't heard all of the statement, I haven't seen
it. Some of the answers I would not agree with. I think, fundamentally,
I am making a very decided distinction between the performer and
the viewer.
Mr. Pattison. I have no further questions.
Mr. Kastenmeier. The gentleman from California, Mr. Wiggins.
Mr. Wiggins. Mr. Ford, I am going to make an argument to which
I do not expect you to agree, but I would like you to give me your
reasons for disagreeing.
I think it can be stated fairly and accurately that there is some
relationship between payment of coi^yright and the market to be
served by the copyrighted work. For example, the sale by a play-
wright to an individual producer for the performance of a play does
not carry with it that all other producers may reproduce that play for
■profit without a further payment.
Similarly, the production of a movie for showing at residential
theaters does not carry with it the implication that it can be reiiroduced
on television without the payment of an additional copyright fee.
The reason, I think, is that the owner of a copyright bargained for a
particular market, and that he did not bargain for more than that.
Kow, if there is some validity to this argmnent, could it not be said
that the owner of a convright. selling convrighted work, the original
transmitter, bargains for a market, and he did not bargain for the
expanded market by cable television, and that accordingly, he should
get some additional compensation by reason of that expanded market.
INIr. Ford. Well, my response is that he does in fact barfrain and
receives payment for every person who has a receiver within the reach
of that television station." So, he makes his bargain, he gets his cash.
He intends to sell it. and he dedicates it to the public within the bounds
of that station.
And when he figures his price, he knows substantially how many
people are there. He knows precisely what he is selling, and who he is
dedicating this program to.
Mr. Wiggins. Well, I am assuming something that you may chal-
lenge, that the cable opens up a new market that is not available to
normal transmission.
INIr. Ford. But the advertiser receives the benefit of that. And the
copyright owner, as the Supreme Court pointed out, will increase his
fee to compensate him for the reception of that program by all the
people within that area. That was the logic on which the Supreme
Court permitted the distant signal to be brought in because it said it
632
did not — the Supreme Court in its logic said — it did not affect the
ability of the copyright owner to extract compensation for his product.
Mr. Wiggins. In summary, then, your answer to my argument is that
it is the same market.
Mr. Ford. The same market. It has been paid for by the man watch-
ing that program simultaneously with its broadcast.
Now, when you get into delayed broadcasts, w^hen you get into some,
of the other things, then you are getting into tlie question of origina-
tion, the producer ; you have the other producer, the books and all those
other things which are different.
But what I am talking about is a simultaneous reception, and there
is no basis under the Sun for the copyright owner to get paid a second
time.
Mr. Wiggins. In that event, would you differentiate between local
and distant signals ?
Mr. Ford. No, I would not. I would have up until the Supreme Court
decision ; and the logic for this can be found in the CBS case. I think,
when you look at it, the Commission limits the number of distant
signals that can be brought in.
If you look at the cited statistics in my statement — which I did not
j'ead — the income of the copyright owners — and we are talking about,
really, only 28 companies. If we look at tlieir income from copyrights,
as near as we can determine from the figures which have been published,
they have made a very substantial increase in their income as a result
of television.
Now, as a result, if a few distant sifi:nals are brought in, they should
give something back for this tremendous increase in profits they have
made in the last 10 years.
Mr. Wic^xiNS. To whom?
Mr. Ford. To the public by not charging tlie public. For instance,
about 85 percent of the public is in the first 100 markets. And these dis-
tant signals that are brought in are most beneficial to those other mar-
kets beyond the first 100 markets.
Mr. Wiggins. Just to get a direct answer, you would not support the
concept of a copyright payment for tlie importation of distant signals
for simultaneous transmission on local television ?
Mr. Ford. No, based on the Supreme Court decisions.
Mr. Kastenmeier. The gentleman from Massachusetts, Mr. Drinan.
Mr. Drinan. Thank you very much, Mr. Chairman. Mr. Ford, the
statute that you refer to on page 5 does not, as I read it, state cate-
gorically that the transmission has to be simultaneous ; perhaps it is
there. This would allow for delayed broadcast.
Mr. Ford. It is not intended.
Mr. Drinan. Not intended. But you intend it.
Mr. Ford. "The further transmitting to the public, by means of
broadcast receiving equipment of whatever design, including antennas,
and^ related equipment, wherever located, which receives and makes
available by means of cable, or wires and related equipment to individ-
ual reception sets," there is nothing in here that would permit anything
other than simultaneous reception.
Mr. Drinan. It does not preclude it, though.
Mr. Ford. Probably.
Mr. Drinan. You should tighten that up.
633
Mr. Ford. In the "Provided" part it probably does. "The further
transmission is made Avithout altering or adding to the content" — ^there
is no specific prohibition against that. It should be tightened up.
Mr. Drinan. Thank you.
Now, I have trouble with the words also "no direct transmission
fee is charged" the w^ords "direct admission fee," if an auditorium in-
vited 500 people to see something that they otherwise could not see,
I would assume that you would say they should pay the copyright.
Mr. Ford. I would say that is logically converting it from a recep-
tion service to a production and a performance.
Mr. Drinan. All right.
Mr. Ford. There should be a copyright paid.
Mr. Drinan. How can you say there is no direct transmission fee
when they pay $5 or $6 a month ?
Mr. Ford. What was that, again ?
Mr. Drinan. If they pay a direct admission fee, pay their dollar to
get in to see that nice film that otherwise they couldn't see, you would,
say they have to give the copyright to the original transmitter.
How can you say, if they pay $6 a month for this regular subscribing
service, that they are immune from that copyright liability ?
Mr. Ford. They are paying for a service, an antenna service, $6 a
month. They are paying an admission fee to a performance in the
other case ; that is the distinction that I make.
Mr. Drinan. I suppose the transmission fee in that other case just
covers the cost of the cable television.
Mr, Ford. Well, the issue is whether it is a performance or isn't a
performance. If it just covers the cost, it's still a performance; and it
is not a payment for the reception service, or the rental of the an-
tenna. It is the admission charge to a performance, and I would make
that distinction,
Mr. Drinan. Well, while your testimony is persuasive, Commis-
sioner, may I just conclude by asking, is this proposed amendment to
section 106, is that all that you want in the law, from this testimony?
Mr, Ford. That's correct. There are some things that have to be de-
leted.
Mr. Drinan. That's the essential thrust.
Mr. Ford. Yes.
Mr. Drinan. Thank you very much.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson, Thank you, Mr, Chairman.
I want to recap again with you my impression, and that impression
is from your testimony. In response to Mr. Wiggins' questions, Mr.
Wiggins brought out that a copyright owner on a theatrical produc-
tion, for example, charges a royalty fee for a performance within a
theater, with which I have no quarrel.
The fee is the same, regardless of w^hether a theater is sold 10 per-
cent, or 50 percent, or standing room only ; the fee is the same. He is
paying a fee for the potential audience, which would have to be 100
percent full, that is the potential. Now, that is true if it is a regular,
legitimate theater, a motion picture theater, or a drive-in, the same
analogy applies,
I think it is your position that where a motion picture is broadcast
by television through a broadcasting channel, the royalty rate is in-
634
eluded on the basis of the potential audience of that TV station;
whether all the people listen, or part of them, that's the potential au-
dience, potentially 100 percent of the viewing public within both the
grade A and the grade B contours.
I think it's your position that cable within those areas simply en-
hances the possibility that you may get a 100-percent audience. On
the other extreme, where cable originates a program, originates a
movie, for example, you have no objection in your philosophy to the
payment of a royalty.
Mr. Ford. If he becomes the producer of the program, that's right.
Mr. Danielson. So, you accept that concept.
Mr. Ford. That is on a bargaining basis.
Mr. Danielson. I understand both of those, and I have one that
gives me a problem, and that is an imported signal. The imported sig-
nal is broadcast, but in computing the royalty fee that the advertiser
has to pay, in fact, he was computing a full house within the grade A
and grade B contour, but he wasn't necessarily computing this outly-
ing area, the area into which it's imported — or into which it's exported,
I don't know which it is. I have a problem there, would you help me
out on that ?
Mr. Ford. Yes. The Commission requires very detailed reports on
what stations are carried by what systems. There is a very definite,
specific limitation on the number of distant signals that you can bring
in. Any copyrighter, in selling his product to a particular station that
is a distant station, for instance Arlington, knows full well that that
program is going to be delivered to that community, and he will adjust
his rate accordingly.
That is why I believe the Supreme Court said that the importation
of a distant signal did not prevent the copyright owner from ex-
tracting the full value for his product.
Mr. Danielson. On this theater concept, again, with a potential
full house, standing room only ; if the theater is half empty, I guess
the copyright owner prevents the theater owner from giving away
the rest of the tickets and bringing in 500 people who might not other-
wise have attended. It makes no difference on his royalty.
Mr. Ford. And in addition to that, his next attraction, he will not
pay quite as much.
Mr. Danpelson. That is a matter of bargaining.
One last thing is a comment. I'm glad that you have recognized what
bothered me very much in all those hearings, that there seems to be a
confusion between a communications policy and a copyright policy.
Our committee is charged with the copyright policy, and I think there
seems to be an effort to try to have it in the regulations for communica-
tions through the device of copyright.
Well, thank you very much.
Mr. Kastenmeier. The gentleman from Illinois, Mr. Railsback.
Mr. Railsback. Do you think there might be a constitutional prob-
lem, by having the Copyright Office too involved in administering
this, as it is a kind of quasi-legislative agency, an executive-type
agency ?
Mr. Ford. I really hadn't considered at any length the Copyright
Office involvement except to the extent that I know they are going to
ask for a lot of information; and knowing bureaucracies as I do, it
will get greater, and greater, and greater. We are alreadv regulated by
the FCC, the States are now moving into it, and to have the Copyright
635
Office move into it too, it just seems to me that the industry is going to
be swamped in paper.
]VIr. Railsback. Am I correct then, that you would favor the FCC
handling it ?
Mr. Ford. I think there is no question that on the technical aspects
of cable television we must have a uniform system. The FCC must
have jurisdiction to regulate certain aspects of cable television, there
is no question about that.
Mr. Railsback. Thank you.
Mr. Ford. There is one thing I would like to add, if I may. There was
a statement to the eti'ect — or a question — concerning the Consensus
Agreement.
AVithin 3 months after the Consensus Agreement was issued, the
Commission issued its statement, its R\iles of 1972, and in the course
of that, in my view, they abrogated the Consensus Agreement within
3 months. And not only that, but within the last few weeks they issued
another report in Docket No. 19995 in which they repeated that.
As far as I am concerned, the Consensus Agreement wasn't an agree-
ment to begin with, never has been, and shouldn't be recognized at
any time by anybody.
Mr. Kastenmeier. Mr. Ford, I just have one more question. You
were talking about the Connnission; do you agree wnth its rule on
exclusivity, 76-151, the rule referred to by Mr. Bradley ?
Mr. Ford. I am probably its most ardent foe. I have presently a
case pending on behalf of Mr. Barco who will be here in a few moments,
before the Court of Appeals, and hopefully they will disagree with
about six otlier circuits that have held the nonduplication rule valid.
I think it is invalid, I think it is terrible, and I hope to get it knocked
out.
Mr. Kastenmeier. The reason I asked you, to the extent that you
and anyone else rely on those as a reason for us not to legislate in the
area of copyright because the FCC made these rules to protect these
people, and therefore we should rely on these rules. But if in fact we
can't rely on these rules either, there may not be very much to rely
upon.
Mr. Ford. Well, hopefully, within a few weeks, there will be nothing
to rely upon. [Laughter.]
Mr. Kastenmeier. One other question, and it is just a matter of
information, T don't know that it really pertains to what we are doing.
Tlie question is, do cable system managements have the right to deny
membership by any applic!int,*up or dowii the block in the city ?
]\fr. Ford. This is a very young industry, and some of the franchises
issued were two paragraphs, one was just the consent to hook up wires.
And as the industry matures, as new franchises are being written, as
cities become more mature, then, I think, we will find a definite obliga-
tion that you cannot deny service, the same as a public utility.
Mr. Kastenmeier. Certainly broadcasters cannot deny service to
anybody. But to the extent that cable television is different, that you
do have a subscriber, you could either make the contract with such a
person, or not. It may differ in terms of the potential market.
Mr. Ford. I have never heard — and I have been pretty active — but
I have never heard of any difficulty at all because every cable opera-
tor I know will get every connection he can get.
636
Now, there are problems. For example, supposing a particular house
is out in the country 8 miles, by itself, and your rate is $4 a month ;
it costs $4,000 a mile to run a cable out there, then you have problems.
But probably the franchise is so written as not to include those outly-
ing areas.
Mr. Kastenmeier. Well, I think theoretically you might have a
problem there, you might have a subscriber who is an electronics ex-
pert, you might have a subscriber on the system who originates and
transmits, who might transmit himself. I don't know if that would be
possible, but he would transmit to his neighbors up and down the
street for a lesser fee. I was just wondering what the relationship would
be of the original cable operator and the subsequent operator in the
field who is obviously not paying copyright, other than to retransmit
such signals.
Mr. Ford. Well, this raises a bunch of questions. Most cities do not
grant exclusive licenses, or exclusive franchises, at least they have not
in the past. But most of them now have ordinances which prohibit the
operation of a system — and they define "system" — without a certificate
from the city. The Commission defines 50 customers as a cable system
before you become subject to those various rules.
But basically there is no problem at all, most of the ordinances ex-
clude apartment houses. And of course the legislation here exempts
apartment houses. Now, some of these apartment houses may have two,
or three thousand apartments in them and yet, they will be exempt
under the bill which is pending here ; whereas a cable system of a thou-
sand customers in a little small town out here will be liable. So, to that
extent it's an inaccurate bill.
Mr. Kastenmeier. Well. I was looking, theoretically, at what prob-
lems could arise.
Mr. Ford. Yes.
Mr. Kastenmeier. In any event, the committee thanks you again
for appearing this morning.
Mr. Ford. I tell you, I hope I'm not going to be back in here in 10
years.
Mr. Dantelson. I hope you are, we'll have a better bill.
[The prepared statement of Frederick W. Ford follows :]
Statement of Frederick W. Ford on Behalf of the Ad Hoc Committee of
Concerned Cable Television Operators for a Fair Copyright Law
I. introduction
Mr. Chairman : My name is Frederick W. Ford. I am a member of the Wash-
ington, D.C. law firm of Pittman Lovett Ford and Hennessey, with oflBces at
1819 H Street, N.W. I appear here today on behalf of the Ad Hoc Committee
of Concerned Cable Television Operators For a Fair Copvright Law to suggest
an Amendment to the Bill and to support passage of the Bill, as amended.
H.R. 2223 is almost identical with S. 1361 which was passed by the Senate
at the Second Session of the 93rd Congress. Senate Report No. 93-983 from the
Committee on the Judiciary and Senate Report No. 93-1035 from the Committee
on Commerce to accompany S. 1361 contain the views of the Committees on that
Bill. The Report of the Judiciary Committee (p. 100) contains a history of the
Copyright Revision Legislation, a sectional analysis of the Bill and discussion.^
^ Thprp is attachPfl hprpto as Anriendix 1 a Mpmorandiim to The Art Hoc Comrnittep o^
Ooncernprt Cahlp Television Operators For a Pair Copyritrht I.aw on S. I.'^fil. dated
November 1.5. 1974, e-'plaininc the reasons the indnstrv has tried in the past to oompro-
misp this issue. All of those efforts were unsuccessfnl. The 1974 Supreme Court's decision
in TelePrompTer v. GBS, infra, now places a totall.v different complexion on the cable
copyright issue as to distant signals authorized by the FCC to be carried.
637
II. PEaiTINENT PROVISIONS OF H.R. 2223
Briefly, Section 106 gives an exclusive right to a copyright ovpner to "display"
or "perform the copyrighted work publicly" subject to Sections 107-117. Section
111 provides an exemption for certain secondary transmissions, including hotels
and apartment houses,^ institutional material, certain carriers and non-profit
groups. Subsection (b) provides for full liability for the retransmission of a
Pay-TV vFork. Subsection (c) provides certain compulsory licenses for the com-
munity antenna function of cable systems. Notwithstanding the compulsory
license, full copyright liability is imposed if the secondary transmission is not
permissible under the FCC rules or authorizations. In short, the public will ulti-
mately have to respond in cash for an operator's violation of FCC rules which
certainly has nothing to do with copyright.
Subsection (d) provides for filing certain information with the Ofiice of Copy-
right, depositing royalty payments there, based on a sliding percentage scale of
gross receipts from subscribers, and for the distribution of those funds. Subsec-
tion (e) contains various definitions.
Section 801 provides for a Copyright Tribunal to adjust the royalty base as
the arbitrators think, if not overruled by the House or Senate wdthin 90 days.
III. DIVERSE POSITIONS
There are strong differences of opinion between the Register of Copyrights,
broadcasters, copyright owners and most CATV operators concerning liability
of CATV for copyright fees. The Register of Copyrights, broadcasters and copy-
right owners favor liability of community antennas for copyright. As I under-
stand the situation, the Register of Copyrights' position is not whether but how
much CATV should pay. Copyright owners would like the Congress to impose
complete liability on community antenna systems. Tlie broadcasters' interest, in
whether or not community antennas pay copyright has always been obscure to me,
unless the more expenses community antennas have, the higher the rate and the
fewer subscribers they will have. Copyright then becomes a device to protect
broadcasters — not to compensate the author.
The broadcasters were not very obscure, however, in 1971 when NCTA and the
copyright owners were about to compromise their differences. The National
Association of Broadcasters and the Association of Maximum Service Tele-
casters went to the White House OflSce of Telecommunications Policy ^ and
sparked enough pressure by it and the FCC to cause the NCTA Board of Directors
to capitulate by a one vote majority into accepting the iniquitous "Consensus
Agreement" without change. Apparently, the NCTA still feels committed in
principle to pay "reasonable" copyright despite the coercion and even though the
FCC repudiated the "Consensus Agreement" within three months after it was
initialed * as it had to do. But the commitments of the NCTA Board then or now
really have no bearing on the issue facing this Subcommittee. Those commit-
ments cannot determine the public interest or, in our opinion, justify this Com-
mittee in recommending that the public pay twice to see the same show. The
Ad Hoc Committee opposes the payment of copyright on the community antenna
function and suggests an amendment to the Bill to eliminate copyright liability
of community antennas for carriage of television signals.^
2 What defense can there be for the^provislons of this Bill that establishes oopyripht
liability based on the method of the vieioers' payment? To wit, hotels and apartments are
exempted, as indirect payors, and CATV*^5ubscrihers are included as direct payors. It is
iinlikely that the Courts would accept such an arbitrary distinction — even if the indus-
tries involved agree to it.
3NTCA rf Copi/rioht, The Historv. Recent Board Action, The Future (Dec. 1974, p. 9).
* Cahle Television Report and Order, 3fi FCC 2d .3. 27 (1972). See to same effect, First
Report and Order in Docket No. 19095, 40 Fed. Reg. 17727 (1975).
^ The following amendment to section 106 is suggested: Notwithstanding the provi-
sions of section 106, the following are not infringements of copyright :
*******
"(5) the further transmitting to the public, by means of broadcast receiving equip-
ment of whatever design, including antennas, and related equipment, wherever located,
which receives and makes available by means of cable or wires and related equipment to
individual reception sets of the kind commonly used in private homes, of a transmission
embodying a performance or exhibition of a work ; Provided: The further transmission is
made without altering or adding to the content of the original transmission and no direct
admission fee is charged for the privilege of seeing or hearing such transmission and the
receiving apparatus is not coin operated."
R7_7flR r»_ 7fi - .
638
IV. THE ISSUE
The Ad Hoc Committee does not view the matter of copyriglit payments as an
issue between it and the Office of Copyrights, the copyright owners, the NAB,
AMST, or NCTA, because none of them will pay copyright— only the public ulti-
mately pays copyright on television programs. The issue here is between the
copyright owners and the subscribing memhers of the public to community an-
tennas. That issue is as follows : "Should the Congress, contrary to the reason
and logic of the United States Supreme Court, on two occasions," create the
legislative fiction that CATV is engaged in the display or performance of a copy-
righted work publicly and is, therefore, liable for the payment of copyright fees
which, of course, it would have to collect from the public as a part of its antenna
service?"
The proposed legislation would create this legislative fiction by defining the
right to display or "perform the copyrighted work publicly." ' The definitions of
"perform," "display," "publicly" and "transmit" in Section 101 of the Bill
intend, according to the Committee Report,* to mean that "A cable television
system is performing when it retransmits the broadcast to its subscribers." The
right of public performance in the copyright owner is not limited by any "for
profit" requirement. Section 111 of the Bill proposes limited exceptions from
liability of CATV and establishes communications policy — the proper function
of the Commerce Committee.'
V. THE PUBLIC SHOULD NOT BE REQUIEED TO PAY A SECOND COPYRIGHT FEE FOR THE
SAME PROGRAM BECAUSE OF THE TYPE ANTENNA IT USES
The Office of Copyright makes its case for CATV copyright liability on the
fact that CATV charges its subscribers a fee for its antenna services which
makes a profit and failure to share these profits could damage the copyright. The
Supreme Court disagreed with these assumptions and found otherwise in Tele-
PrompTer Corp. v. CBS, supra n.2. If the Office of Copyrights' theory of liability
is correct, which it is not, then anyone who makes a profit, directly or indirectly,
from a performance of a copyrighted work should be liable. This liability would
run to wire and receiver manufacturers and countless other business enterprises
which enable the public to view the performance.
The fact that CATV makes a profit, by assisting the TV station to deliver its
programs to the public it is obligated to serve and for which the copyright owner
has been paid, has no bearing on whether the public should pay copyright fees
via CATV. CATV services keeps the copyright owner honest by delivering the
signal carrying his program to the public for which he has been paid.
At the present time, a sponsor who buys a program usually pays the copyright
owner for one performance over one or more stations. The sponsor pays the copy-
right owner, directly or indirectly, for tickets to the show for everyone within
the grade B contour of the stations televising it and as far beyond that contour as
it can be received. This cost is passed on to the public eventually in the purchase
price of the product.
It is a scientific fact, recognized in the Sixth Report and Order .^^ however, that
over average terrain only 90% of the locations in the Grade A contour receive an
adequate signal 50% of the time, and within the Grade B contour only 70% of
the locations receive an adequate signal 50% of the time. I will venture that
most sponsors paying for a program think they are getting a potential of 100%
of the locations 100% of the time, but that just isn't so, even thougli the copyright
owner is probably collecting for 100% of the locations 100% of the time.
A community antenna television system within the Grade B contour merely
aids the sponsor in getting his money's worth from the copyright owner and the
station by assuring the sponsor that anyone who desires the signal will receive
it clearly, and thus increase the potential audience. Certain copyright owners are
not satisfied with this. They collect from the sponsor who recovers his cost from
the public and they would like to collect again from the CATV operator who must
also pass his cost on to the public. Some way or other it does not seem right for
the public to have to pay for "two tickets to the same performance." No one has
^ Fortnight!;/ Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968); Tele-
PrompTer, Inc. v. OBS, 415 U.S. 394 (1974).
T Sections 102, 106, H.R. 222,3. 94th Con?., 1st Sess.
« Senate Report No. 93-983, 93rd Cong, on S. 1361, p. 113.
" See Senate Report No. 93-1035, 93rd Cong., 2d Sess. on R. 1361, p. 66.
1" 41 FCC 148.
639
attempted successfully, to my knowledge, to refute this argument. They merely
ignore it and tallc about something else.
The copyright owners by virtue of their access to the aii", with no charges by the
Government to transport their product to tlie public compared to CATV companies
which pay up to $10,000 a mile for their channels of communication to subscribers,
sliould certainly be required to forgo a second fee from a reception service for
the public.
This is particularly true here when a handful of companies seek this double pay-
ment from the American people across the country for what Congressional policy
and judicial rulings now dictate is in the public domain."
Cable television or its advertisers will pay for any copyrighted programs it
originates, whereas the public would receive nothing for the cash the broadcasters
would have the copyright owner siphon from the public via CATV which otherwise
could be used for copyright fees for more diverse programming.
There is a basic conflict between communications policy and any copyright law
in wliieh a cable antenna system is required to pay copyright on any signal it is
authorized to receive and distribute on its system by the Federal Communica-
tions Commission.
The Supreme Court has construed the Communications Act to empower the
Commission to regulate CATV. In exercising this power, the Commission requires,
as a condition of receiving and carriage of television broadcast signals, that CATV
systems carry all local signals. The definition of local signal varies according to the
size market where the system is located. Neverthelss, the Commission exercises its
power to require carriage of certain signals and permits the carriage of others.
Such regulations now constitute CATV a supplemental service to make the
Commission's allocations of frequencies more effective. Until set aside, revised or
revoked, CATV systems must comply with those carriage rules.
The proposed legislation would compel CATV to pay copyright owners for
distributing signals carrying their copyrighted works. The broadcaster has the
right to pick and choose the copyrighted works he will buy and broadcast.
Congress should set the record straight. If the Commission is confirmed by Con-
gress in the power to require carriage of particular signals by CATV, then CATV
will remain a supplemental reception service, perform nothing, and owe nothing.
If it is desired to require copyright payment by CATV for its supplemental role,
then CATV should be entitled to carry whatever programs it desires, delete the
advertising and substitute its own. This is strictly a communications policy
question. The broadcaster should not be permitted to have it both ways — collect
additional revenue from sponsors for the added carriage of CATV and require
CATV to pay copyright fees. In short, the bx'oadcaster is arguing for the morality
of unjust enrichment to copyright owners at the expense of the public CATV
serves as a means of using copyright to restrict the growth of CATV. It is the
public who will unjustly enrich the broadcaster and/or the copyright owner — not
the CATV operators. These anti-consumer provisions should not be enacted into
law.
We urge the Congress not to compromise the fundamental legal principles
established by the United States Supreme Court on two occasions^decisions
that are on the side of the vieicer. The broadcaster — whatever his motives are —
is wrong in trying to saddle its viewers with extra copyright payments to view
its "free" programs through use of a more efficient rented antenna.
Imposing copyright fees on the community antenna function and, in effect,
making the American public pay tribute twice to the 28 corporations in New
York and Hollywood that own substantially all of the copyrighted material on
TV, to watch "free TV" is wrong. If the copyright owners or merchandisers
exercise forbearance on the short term profit of double payment and permit
cable television to flourish, they will be amply rewarded with even greater
profits from the insatiable requirements of cable television for material to fill
its many oi-igination channels in the years to come. The Commission's power
to limit the number of distant signals imported by microwave has been confirmed.
No further power is needed to protect the copyright owner and the public interest.
11 Section 605 of the Communications Act of 1934. as amended, prohibits unauthorized
disclosure of interstate wire or radio communications except "This section shall not apply
to the receiving, developing, publishing, or utilising the contents of any radio communi-
cation which is broadcast or transmitted by amateurs or others for use of the general
public. . . ." (Italic supplied.)
640
Now that the "unfair competition" shibboleth has been discredited," the only
bases for contending that CATV should pay copyright are (1) that it makes
a profit from the use of copyrighted material and (2) that it really does engage
in a public performance for profit. Neither one of these positions are sound. There
is no principle of copyright law which assesses liability for copyright based
on profit alone and certainly none exists in the pending Bill.
As to the display or performance of copyrighted works publicly by community
antennas, the complete answer is that a reception antenna does not perform. The
cable operator does not convert the electronic signal into pictures and sound —
he merely delivers a signal to the subscriber who furnishes his own equipment
to convert the signal to pictures and sound in order to receive and view the
performance. The CATV operator does not use or sell any program or the
performance thereof either publicly or privately. A CATV operator sells a re-
ceiving antenna service, just as a manufacturer sells a receiving antenna from
which he makes a profit, but community antennas do not perform anything. They
are, factually and logically, on the side of the viewer. The only way this can
be changed is by enactment of the legislative fiction that furnishing an antenna
is a performance publicly.
Despite the FCC's push for copyright liability, the copyright law is not the
place to bypass the Commerce Committees and embed regulatory flexibility in
concrete. The Senate Commerce Committee, in its Report on S. 1361 stated that
it " * * * believes that in view of the potential impact of certain provisions in
S. 1361 on our Nation-wide communications service, ample opportunity should
have been afforded it to consider those provisions in-depth and to have held
hearings on the communications issues." Certainly, CATV should be eliminated
from this Bill, if for no other reason than to permit the Commerce Committees to
develop a national communications policy on cable television before any copy-
right policy on the community antenna function is undertaken.
IV. CONCLUSION
Based on the foregoing review of the background and the provisions of this
legislation, it must be concluded that the provisions of H.R. 2223 concerning
CATV are philosophically unsound. An across-the-board payment, including pay-
ment by the public for two tickets to the same performance or for distant signals
as limited by the Commission's rules, is, in our opinion, soaking the consumer.
We believe that this Subcommittee is justified and should adopt the community
antenna industry's historical position by amending this Bill to eliminate any
copyright liability for the community antenna function, under Section 106 or
other provisions of H.R. 2223, but not, of course, the origination function of cable
television systems for which it should be liable like anyone else.
Thank you.
12 Comments of U.S. Department of Justice in FCC Docket No. 18397A (1970).
"II. 'The Commission's Analysis
"Two premises pervade the Commission's analysis and proposals with respect to
importation of distant signals, not only in this immediate proceeding, but throughout its
consideration of CATV problems : The first is that television broadcasters are being
subiected to 'unfair competition' from CATV operators ; and the second is that there is a
public interest in preserving marginal television broadcasters from failure by various
cross-subsidy devices and restrictions aimed at CATV. We submit that both of these are
incorrect as a matter of policy.
"1. Unfair Competition. The Commission's theory of 'unfair competition' is relatively
simnle : As a result of the Supreme Court's decision in Fortniphtlp Corp. v. United
Artists Television, Inc., 392 U.S. 390 (1968), CATV operators do not have to pay copy-
right fees on broadcast signals, and this the Commission says, results in 'unfair competi-
tion' against broadcasters ■>\'ho do have to pay copyright fees for programming.
"Certainly the Fortnightly decision frees the CATV operator from an expense which
broadcasters must bear ;"but If the Commission is to employ an analysis based on equating
'ower costs with 'unfair competition,' then it cannot look at CATV cost savings in isola-
tion.* [Footnote omitted.] It has, for example, turned over to broadcasters publicly-
owned spectrum at no charges, and allows them to use it at nominal charges. This publicly-
owned spectrum, when combined with a broadcast transmitter, constitutes a program
delivery system which CATV operators cannot duplicate at anything approaching
the unit cost per viewer. Under the Commission's analysis, this constitutes 'unfair
competition' by broadcasters against all other media of communications including CATV.
"The Commission's basic error is misapplying the concept of 'unfair competition.' If
this concept is to have any meaning it must refer to specific acts by one competitor which
are intended to harm others. See generallv Callman, The Law of Unfair Competition,
Trademark.^ and MononoH^s. Ch. 2. 'The Theory of Unfair Competition.' By treating
CATV cost savincs as 'unfair competition.' the Commission has obscured the basic public
policv issues with which it is confronted, and has introduced unnecessarily emotional
terminology into the making of policy for both broadcasters and CATV operators."
641
ELIOT C.LOVETT «963')
RALPH D.PITTMAN
FREDERICK W FORD
LEE C.LOVETT
lOSEPH F.HENNESSEY
lOHN N. PAPAiOHN
ERIC T ESBENSEN
ROBERT A BERNSTEIN
LAW OFFICES OF
PlTTMAN LOVETT FORD AND HENNESSEY
1000 FEDERAL BAR BUILDING WEST
1819 H STREET. NORTHWEST
WASHINGTON. D.C. 20006
'2021 293-7400
APPENDIX NO. 1
CABLE ADDRESS
■PITLO
OF COUNSEL
CRECC P SKALL
750 TERMINAL TOWER
CLEVELAND. OHIO 44113
1216) 241-3820
MEMORANDUM
November 15, 1974
TO:
FROM:
SUBJECT:
Ad Hoc Committee of Concerned Cable Television Operators
For a Fair Copyright Law
Post Office Box 389
Painted Post, New York 14870
Frederick W. Ford
Copyright Legislation
This memorandum is in response to your request for an analysis of United Sates Senate Bill
No. 1361 which was passed on September 11 , 1974 and is now pending in the House of Representatives.
In addition, this will respond to your further request, by letter of October 29, 1974, that we discuss the
reasons that community antenna systems, as distinguished from other phases of cable television
systems, should not be liable for copyright. Finally, you ask that an appropriate revision of Section 1 1 1
of S.I 361 be prepared.
I — BACKGROUND
Before undertaking an analysis of the bill, it is important to understand its background. A brief
history of the copyright revision program will aid in appreciating the various positions of the cable in-
dustry as they have evolved during the past 10 years.
The present Copyright Law of the United States was enacted in 1909 to carry out the following
language of Article 1, Sec. 8 of the Constitution of the United States:
"To promote the Progress of Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right to their respective Writ-
ings and Discoveries."
The Legislative Appropriations Act of 1955 appropriated funds for a comprehensive program of
research and study of Copyright Law revision by the Copyright Office of the Library of Congress. A
number of reports were published, including the Supplementary Report of the Register of Copyrights on
the General Revision of the U.S. Copyright Law: 1965 Revision Bill (89th Cong., 1st Sess., House Com-
mittee Print), explaining the thinking behind its various sections. The bill proposed by the Register of
Copyrights was introduced on February 4, 1965 (H.R. 4347, 89th Cong., 2nd Sess.).
In describing the basic approach of the bill, the Register of Copyrights stated at page 13:
"The basic legislative problem is to insure that the copyright law provides the
necessary monetary incentive to write, produce, publish, and disseminate
creative works, while at the same time guarding against the danger that
these works will not be disseminated and used as fully as they should be-
cause of copyright restrictions."
When some commentators discuss copyright and the incentives to the starving writer in the cold
garret, they are not talking about television. There may be starving writers in cold garrets but, if there are
any such people involved in television, it is 28 companies, including the networks, that are keeping them
there. This copyright bill probably will not put one penny in any of their pockets.
642
Note the testimony of Mr. Arthur B. Krim, President of the United Artists Corporation, on June 24,
1965, when he appeared before Subcommittee No. 3 of the House Judiciary Committee (Hearings on
H.R. 4347, p. 1332), on behalf of Allied Artists Television Corp.; Danny Thomas Enterprises, Inc.; Desilu
Productions, Inc.; Embassy Pictures Corp.; Independent Television Corp.; fVletro-Goldwyn Mayer, Inc.;
Wolper Productions, Inc.; Screen Gems, Inc.; Seven Arts Productions, Inc.; Twentieth Century-Fox
Television, Inc.; United Artists Television, Inc.; Universal Pictures, Inc.; Walt Disney Productions, Inc.;
and Warner Bros. Pictures, Inc. Mr. Krim stated:
"I think, gentlemen, that this group of companies which, as you can see,
number 14, represents in excess of 75 percent of the copyrighted material
which is going over the airwaves today. I would venture the further guess
that if we were to add to these 14 another number, certainly not more than 14,
and of course including the three networks, we would cover so close to 100
percent of the copyrighted material which is going over the airwaves and that
the exceptions would be relatively minor in nature."
The Register of Copyrights claimed in his Report that he took no position on the two pending
cases against the cable industry. i / Nevertheless, he stated (p. 22) that under Section 106(a) (4) and (5),
"A community antenna service would be performing when it retransmits the
broadcast to subscribers over wires;"
On pages 40, et seq., the Report discusses secondary uses of transmissions. It lists the arguments
advanced for an outright exemption of CATV and those opposed to any exemption before summarily
disposing of this issue as follows:
"On balance, however, we believe that what community antenna operators are
doing represents a performance to the public of the copyright owner's work.
We believe not only that the performance results in a profit which in fairness
the copyright owner should share, but also that, unless compensated, the
performance can have damaging effects upon the value of the copyright. For
these reasons, we have not included an exemption for commercial community
antenna systems in the bill."
Extensive hearings were held on H.R. 4347, in 1965, during the 1st Session of the 89th Congress
which resulted in the bill being reported on October 12, 1966 with amendments. These amendments did
not alter the definitions recommended by the Register of Copyrights "To perform or display a work
'publicly' " or " 'transmit'." This language was intended to impose full liability on the transmissions by
CATV as provided by Section 106 of the bill. Earlier studies of the Office of Copyright had not considered
CATV. It was purely an afterthought.
The bill also was amended, however, by adding a highly complicated Section 111 which provided
limitations on exclusive rights by secondary transmissions (Union Calendar No. 999, 89th Cong., 2d
Sess.). Section 111 contained in H.R. 4347 may be briefly summarized in the following six points.
1 . In order to enjoy any exemption from the payment of copyright fees, a CATV system must not
originate any programming other than "weather, time and news reports, free from editorial comment:
agricultural reports; religious services; and local proceedings of governmental bodies", there must be
no "commercial or political" advertising or sponsorship of closed circuit presentations; and there must
be no charges made for any particular program or programs. Also, not more than two channels may be
devoted to originations. Finally, if the CATV operator engages in the deletion of any commercials or
station identification, or in any way alters program content, he loses all exemption under the Act.
2. A CATV system otherwise eligible for exemption is not liable for the payment of copyright
royalties for any broadcast programs received within the "limits of the area normally encompassed" by
the broadcast station whose signal is received, as determined by the Register of Copyrights. Further-
more, if a copyright program is broadcast by two or "ore TV stations which provide a Grade B signal over
ihe CATV system, and if one of the TV stations has the exclusive license from the copyright owners to
transmit the program in the area served by the CATV system, the CATV system must protect that ex-
clusivity, provided it is given ten days' written noiice of the exclusivity.
3. A CATV system which receives the program of a television station which does not "normally"
serve the area in which the CATV operates must pay copyright fees for such programs, except in an area
which is not "adequately" served by television stations.
1 / Fortnightly Corp. v. United Artists Television Inc. 392 U.S. 390 (1968)
TelePrompTer, Inc. v. CBS 415 US. 394 (1974)
2
643
4. If the CATV system is in an area which is not "adequately" served by television stations, it can
receive, under a system of compulsory licensing, the programs of a TV station which does not "normally"
serve the area. The bill or report defines an area as "adequately" served when a "preponderance" or "more
than half" or "substantially all" of the programs of the three major television networks are normally re-
ceived. Also, the exclusivity limitation discussed under paragraph 2, above, applies equally in an in-
adequately served area. In order to qualify for compulsory licenses for the importation of non-Grade B
or non-local signals under the provisions discussed above, the CATV system must supply to the Register
of Copyrights information as to the persons who own or control the CATV system and information as to
the name and location of the stations carried on the CATV system.
5. If a CATV system receives the programs of non-local stations in an area covered by a "local"
station, and duplicates the programming provided by the local station, the CATV system loses all ex-
emption from copyright liability.
6. The parties bargain for a reasonable fee and the Court decides the issue in case they cannot
agree. Failure of either party to offer or accept a reasonable fee will incur up to treble fee damages for the
copyright holder.
The section reflects many regulatory concepts which would be enforced by the copyright bill.
These regulatory concepts, it was understood, had their origin at the Commission. It should be remem-
bered that at this time (October 12, 1966) the legality of the Commission's Second Report and Order
asserting general jurisdiction over CATV was still very much in doubt. The Commission's regulatory
program of containment "peel<s" out of the provisions of this section.
In presenting testimony on H.R. 4347 (89th Cong.), which became H.R. 2512 (90th Cong.), the
then President of NCTA (Hearings before Subcommittee No. 3, Committee on the Judiciary, House of
Representatives, 89th Cong., 1st Session, p. 1245, June 24, 1965), after discussing the conflict between
the bill and communications policy under the jurisdiction of the Interstate and Foreign Commerce Com-
mittee, stated that CATV systems should be free of copyright clearance requirements. An amendment
was then offered2/ (Hearings, p. 1255) to exempt CATV from copyright with the following three qualifica-
tions: (1 ) The further transmission by CATV is made without altering the content, (2) no direct admission
fee is charged, and (3) the reception apparatus is not coin operated. This amendment would have removed
the possibility, it was stated, of a conflict between this legislation and other legislation being considered
for establishment of communications policy.
When H.R. 2512 was passed. Section 111, relating to CATV, was stricken from the bill under an
agreement between the Chairmen of the Judiciary Committee and the Interstate and Foreign Commerce
Committee. This agreement was entered into to settle a violent dispute between the Committees over
regulation of CATV in the copyright bill. This dispute erupted after a speech by Congressman Arch A.
Moore, Jr. (R. W.Va.) (Cong. Record, April 6, 1967, p. H3624, et seq.) followmg up his letter of the
previous day to all members of the House.
In his speech, Congressman Moore attacked the bill for attempting to use copyright for the
regulatory control of CATV by: (1 ) an invasion of the jurisdiction of the Commerce Committee; (2) effect-
ively prohibiting CATV from originating programs; and (3) protecting pay-TV on broadcast stations and
effectively precluding pay cable.
As the bill passed, it left CATV fully liable for copyright. NCTA agreed to the bill because of the
frightening decision of the U.S. District Court (S.D. N.Y.) holding CATV liable for infringement of copy-
right. If this decision were to be affirmed on appeal, at least half of the legislative process would be
completed and speedy legislative action would be possible to protect the industry.
On August 2, 1966, the then President of NCTA presented testimony to the Subcommittee on
Patents, Trademarks and Copyrights of the Committee on the Judiciary of the U.S. Senate of S.1006, an
identical bill to H.R. 4347. This testimony was delivered some 16 months after testimony before the
House on H.R. 4347 and some eight months before House passage of H.R. 2512.
A number of things had occurred between the House and Senate Committee hearings. The Dis-
trict Court (S.D. N.Y.) had held on May 23, 1966 that Fortnightly's CATV system had infringed United
2/ "Notwithstanding the provisions of Section 106, the following are not infringements of copyright:
"(5) the further transmitting to the public, by means of broadcast receiving equipment of whatever design, including
antennas, and related equipment, wherever located, which receives and makes available by means of cable or wires and related
equipment to individual reception sets of the kind commonly used in private homes, of a transmission embodying a performance
or exhibition of a work; Provided: The further transmission is made without altering or adding to the content of the original trans-
mission and no direct admission fee is charged for the privilege of seeing or hearing such transmission and the receiving
apparatus is not coin operated."
644
Artists' copyrights; the FCC asserted jurisdiction over all CATV systems on March 8, 1966; and the
House Subcommittee no. 3 announced substantial modification in the provisions of H.R. 4347. Operating
in this climate, NCTA believed, at that time, that it was compelled to make a compromise proposal. In
doing so, it was stated:
"These proposals in their entirety may satisfy no one — certainly not our-
selves — but they are made in good faith . . ." (Hearing, id. p. 86).
There were six points in the proposal. In brief, they were as follows:
1. No liability for programs received off-the-air;
2. A compulsory license for distant signals in an inadequately served area;
3. Industry wide bargaining for programs from distant signals received in adequately served
areas at fees fixed by statue somewhat higher than fees in adequately served areas;
4. Liability of CATV for all copyrighted programs which it originates;
5. Music should be considered cleared at the source;
6. No limitation on CATV reception of non-copyrighted programs.
Despite the efforts of NCTA to propose a solution to the copyright issues, admittedly, under the
pressure of the District Court holding, no action was taken on that bill. It should be noted that the Depart-
ment of Justice opposed any extension of copyright liability to CATV because of the possibility of
harmful anti-competitive consequences and that this extension is not justified by valid considerations
of the right to copyright protection (Hearings, p. 211, et seq.).
S. 597 was introduced by Senator McClellan on January 23, 1967 and S. 543 was introduced by him
on January 22, 1969. These bills, so far as CATV is concerned, were substantially the same as S.1006,
however, further hearings were held on S.547 and a Committee Print of December 10, 1969 (91st Cong.,
1st Session) contained a number of changes in Section 111. S.644 was introduced on February 18, 1971
containing the changes reported in Section 111 of S.547. Except for technical changes, S.1361, intro-
duced on March 26, 1973, was the same as S.644.
In a letter dated November 1, 1968, the NCTA submitted to Senator McClellan a proposal which,
under the circumstances then existing, NCTA believed was the only workable compromise, i.e. an across-
the-board approach. This plan would (1) require a compulsory license upon an inclusive payment for all
television signals carried; (2) a smgle place to pay; (3) a provision honoring sports "blackouts" under
Public Law 87-331 ; and (4) no restrictions on originations or reception of uncopyrighted programs. Need-
less to say, this proposal was not accepted. This plan, as well as many other proposals, made to the
National Association of Broadcasters and copyright owners have all been rejected.
Finally, Tom Whitehead, of OTP, and Chairman Dean Burch called a meeting of the interested
parties from which came the Consensus Agreement of November 8-12, 1971. This Agreement has been
termed the ransom price extracted from NCTA for the supposed relaxation of CATV rules (Cable Tele-
vision Report and Order, 36 FCC 2d 3 (Feb. 3, 1972).)
The Consensus Agreement, it is understood, was adopted by a one-vote majority of the NCTA
Board of Directors under great pressure from the Government. That sort of agreement is no agreement.
(For a current press account of the Agreement see CABLE NEWS, Dec. 17, 1971.) Moreover, all of the
Consensus Agreement had to be accepted or nothing — no qualifications or reservations of any kind were
permittted. The pressure for acceptance by the Government was so great that time was not allowed to
consult the industry generally.
The stated purpose of copyright legislation, Mr. Burch informed Senator McClellan in his letter of
January 26, 1972, was ". . . to bring cable into the competitive television programming market in a fair and
orderly way." (Underscoring supplied.)
Cable television, when it originates like a broadcaster, is already on a completely competitive
basis with television — except for the anti-siphoning restrictions placed on cable by the FCC. If there
was any intention of being fair, no such restrictions would have been placed on one of two competitors by
the Government. When CATV is acting as a master antenna on the "side of the viewer" it is not a com-
petitor. Television stations compete with each other which is facilitated by CATV. The CATV function
does not compete (fairly or unfairly) with television — a concept fully supported by the Department of
Justice. (See Comments of Department of Justice in FCC Docket 18397-A, Dec. 7, 1970.)
Chairman Burch also stated in his letter to Senator McClellan:
"But the nature of consensus is that it must hold together In Its entirety
or not at all — . . ."
It is important to observe that the Commission disavowed the Consensus Agreement, in denying
the public the right to comment on it, as it must. This was done by the Commission just a few short
4
645
months after the Agreement by stating, in paragraph 66 of the Cable Television Report and Order, that:
"The Commission has no intention of setting out detailed regulations today
only to revise them tomorrow. But, as we gain experience and insight, we
retain the flexibility to act accordingly — to make revisions, major or minor —
and to keep pace with the future of this dynamic area of communications
technology."
If the Commission can disavow the Agreement In 1972, certainly after the Supreme Court decision
in 1974 In TelePrompTer Corp. v. CBS, Inc., supra n. 1, determined that Importation of distant signals
would have no impact on copyright holders extracting recompense for their creativity and labor or suffer
loss, the cable television Industry is certainly justified In disavowing the Agreement.
In addition to this fact, when the compulsion under which CATV was subjected, in proposing com-
promise plans and accepting the Consensus Agreement, there is no reason to continue to support the
payment of copyright. This is particularly true in the light of Department of Justice's opposition to the
extension of copyright to CATV as antl-competltlve.
On July 31 and August 1 , 1973, hearings were held on 8.1361 . The bill was reported on July 3, 1974
and was passed by the United States Senate on September 11, 1974. It Is now pending In the House of
Representatives where no action is likely this year. A new bill must be Introduced and passed by both
houses next year before it becomes law. As previously indicated, H.R. 2512 was passed in 1967 after
Section 111 was deleted from the bill following a major confrontation between two committees. It Is,
therefore, important to analyze Section 1 1 1 In the context of the present situation because Subcommittee
No. 3 of the House Judiciary Committee has not considered the provisions of the present section.
II— ANALYSES OF S. 1361
S. 1361 consists of eight chapters containing some 68 sections In Title I — General Revision of
Copyright Law. There are three chapters of particular concern to cable television. Chapter 1 Is concerned
with the Subject Matter and Scope of Copyright. Chapter 5 deals with Copyright Infringement and
Remedies. Chapter 8 establishes the Copyright Tribunal.
CHAPTER 1
SUBJECT MATTER AND SCOPE OF COPYRIGHT
Section 1 01 defines various terms. "To 'perform' a work means to recite, render, play, dance or act
It either directly or by means of any device or process or, In the case of a motion picture or other audio-
visual work, to show Its Images In any sequence or to make the sounds accompanying It audible." "To
'display' a work means to show a copy of it, either directly or by means or a film, slide, television image,
or any other device or process or. In the case of a motion picture or other audiovisual work, to show
Individual images nonsequentlally." "To perform or display a work 'publicly' means: (1) to perform or
display it at a place open to the public or at any place where a substantial number of persons outside of a
normal circle of a family and its social acquaintances is gathered; (2) to transmit or otherwise commun-
icate a performance or display of the work to a place specified by clause (1 ) or to the public, by means of
any device or process, whether the members of the public capable of receiving the performance or display
receive It in the same place or in separate places and at the same time or at different times." "To 'transmit'
a performance or display Is to communicate It by any device or process whereby Images or sounds are
received beyond the place from which they are sent."
In the Report of the Senate Committee on the Judiciary to accompany S.1361, at page 113, the
meaning of the above provisions are explained as follows:
"Under the definitions of 'perform', 'display', 'publicly' and 'transmit' in Sec-
tion 101, the concepts of public performance and public display cover not
only the initial rendition or showing, but also any further act by which that
rendition or showing is transmitted or communicated to the public. Thus,
for example: ... a cable television system Is performing when it retransmits
the broadcast to Its subscribers; . . . The purely aural performance of a motion
picture sound track or the sound portions of an audiovisual work, would con-
stitute a performance of the 'motion picture or other audiovisual works'; but,
where some of the sounds have been reproduced separately on phono-
records, a performance from the phonorecords would not constitute per-
formance of the motion picture or audiovisual work."
The foregoing provisions make It clear that the bill intends to reverse the holding of the United
States Supreme Court in Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968) that:
5
646
"Broadcasters perform, viewers do not perform. Tfius, while both broad-
caster and viewer play crucial roles in the total television process, a line is
drawn between them. One is treated as active performer; the other, a passive
beneficiary. When CATV is considered in this framework, we conclude that
it falls on the viewer's side of the line. Essentially, a CATV no more than en-
hances the viewer's capacity to receive the broadcaster's signal; it provides
a well-located antenna with an efficient connection to the viewer's television
set. It is true that a CATV system plays an 'active' role in making reception
possible in a given area, but so do ordinary television sets and antennas."
(Footnotes omitted.)
Section 106 lists five fundamental rights given to copyright owners — the exclusive rights of re-
production, adaptation, publication, performance and display — are stated generally in this section.
"These exclusive rights, which comprise the so-called 'bundle of rights' that
is a copyright, are cumulative and may overlap in some cases. Each of the
five enumerated rights may be subdivided indefinitely and, may be owned
and enforced separately."
However, the bill, after setting up these exclusive rights, provides various limitations, qualifica-
tions, or exceptions in the remaining 11 sections of the chapter. Thus, section 106 is subject to those
sections and must be read in conjunction with those provisions (Report, p. 110, et seq.).
Section 111, which was deleted from H.R. 2512 before it was passed by the House in 1967, has
been revised by the Senate. This section modifies the liability of CATV by limitations on the exclusive
rights of copyright owners in secondary transmission.
This section has five subsections. Subsection (a) provides that a secondary transmission (CATV)
embodying a performance or display of a work is not an infringement if:
(1) The secondary transmission is not made by a cable system, but is, in effect, a master
antenna system located in the local service area of a broadcast station licensed by the
FCC for which no direct charge is made.
(2) The secondary transmission is solely for purposes described in clause (2) of Section 110
(systematic instructional activities, related to teaching content of the transmission, if
transmitted for reception in classrooms, to persons disabled from attending classes or
reception by government employees in the course of official duties).
(3) The secondary transmission is by a carrier that has no control over subject matter or re-
cipients thereof and which only provides wire or cable for use of others.
(4) The secondary transmission is by a governmental body or other non-profit organization
which makes no charge except to defray actual expenses. This exemption applies to
"translators" or "boosters". "This exemption does not apply to a cable television system. "
(Report, id, p. 131)
Subsection (c) provides in clause (1) for compulsory licensing of secondary transmission of the
primary transmission by an FCC licensed broadcast facility upon compliance with the notice of owner-
ship and quarterly payment provisions of subsection (d), and (A) the primary transmission is exclusively
aural and the secondary transmission is permisible under FCC rules; (B) where the cable system is, in
whole or in part, within the local service area as prescribed by the FCC, of the primary transmitter; or
(C) where carriage of signals comprising the secondary transmission is permissible under FCC rules.
Clause (2) of subsection (c) provides that notwithstanding the compulsory license, the secondary
transmission is actionable under Section 501, 502 and 506, as an infringement where carriage of the
signals comprising the secondary transmission is not permissible under FCC rules or where the cable
system has not recorded a notice with the Office of Copyright, as specified in subsection (d). This section
converts the Copyright Law Into an enforcement law for FCC rules by which broadcasters could con-
tinually harass cable operators with vexatious litigation on any pretext of carriage of signals not per-
mitted by the FCC rules. It is submitted that this is not a proper function of Copyright Law.
The Committee considered excluding from the scope of the compulsory license carriage of certain
professional sports, but decided to leave this matter to the Commission and the Commerce Committee
(Report p. 132).
Subsection (b). The meaning of subsection (b) is clearer if considered after (c) because it is
phrased in terms of an exemption to both (a) and (c). This section provides that notwithstanding ex-
emptions of subsection (a) (master antenna, teaching, carriers or co-ops) or subsection (c) (compulsory
license for: aural primary transmissions carried in compliance with FCC rules; local service area signals;
or where secondary transmission are permissible under the FCC rules subject to the notice to Copy-
rights Office) the secondary transmission is not made for reception of public at large, but limited to
particular members of the public (pay-TV).
6
647
Subsection (d) (1 ) provides for notice of ownership of tfie cable system and otfier information tfiat
may be required to the Office of Copyright one month before the secondary transmission. Clause (2) pro-
vides for deposit in the Office of Copyright, on a quarterly basis, in accordance with the Register's
regulations. (A) a statement of account specifying source of income, number of subscribers and the like;
and (B) the quarterly royalty, based on a sliding percentage scale on gross receipts from subscribers for
the basic services of providing secondary transmission of primary broadcast transmitters. The sliding
scale runs from V2 percent on quarterly gross receipts of up to $40,000 to 2V2 percent on quarterly gross
receipts of more than $160,000. Based on a $5.00 monthly rate, a 3000 subscriber system would pay $250
a quarter and a 6000 subscriber system would pay $750 a quarter on $90,000 of gross receipts for basic
subscriber services (Report p. 133). Note the rate base may be expanded to other services on which
copyright may already been paid and the rate increased. The only limit is what the three arbitrators from
the American Arbitration Association prescribe that is not set aside in Congress within 90 days.
Clause (3) of subsection (d) provides procedures for the distribution of royalty fees deposited
with the Register of Copyrights.
Subsection (e) contains definitions of "primary transmission", "secondary transmission", "cable
systems ' and "local service area of a primary transmitter".
The definition of "secondary transmission" makes special provision for non-contiguous states,
territories and possessions.
The definition of "cable system" is unusual in that for royalty fee purposes the Commission's
definition is changed to: two or more cable systems in contiguous communities under common owner-
ship or control or operating from one headend shall be considered one system.
The definition of "local service area of a primary transmitter" is the one in which a television
broadcast station is entitled to insist on carriage by the cable system under FCC rules.
CHAPTER 5
COPYRIGHT INFRINGEMENT AND REMEDIES
Section 501 provides that anyone who violates any of the rights provided in Section 106 through
117 is an infringer. It provides that the legal or beneficial owner may institute an action for infringement
subject to certain requirements. The most significant provision is that for any secondary transmission by
a cable system which is actionable as an infringement of Section 111(c), a television station holding a
copyright or other license to transmit or perform that work shall, for purposes of instituting an action, be
treated "as a legal or beneficial owner, if such secondary transmission occurs within the local service area
of that television station." The Court may require notice to all persons having an interest in the copyright,
as disclosed by the records in the Office of Copyright.
Section 502 gives the Courts power to restrain infringements of copyright.
Section 504 provides that an infringer is liable for actual damages and profits or, at the election of
the copyright owner, statutory damages of $250 to $10,000 as the Court considers just. If the infringement
was willful, statutory damages may be increased to $50,000 by the Court or if the infringer shows that he
had no reason to believe his acts were an infringement, the Court may reduce the statutory damages to
$100.
Section 506 provides severe criminal penalties for willful infringement, ranging from $2500 fine
and one year imprisonment to $50,000 fine and seven years imprisonment.
CHAPTER 8
COPYRIGHT ROYALTY TRIBUNAL
Section 801 establishes in the Library of Congress a Copyright Royalty Tribunal. This section
states that the purpose of the Tribunal is to make determinations concerning the adjustment of royalty
rates specified by Sections 111 and 115 to assure that the rates are reasonable. If the Tribunal finds the
statutory rates a Tribunal rate, or the revenue basis in respect to Section 111 does not provide a
reasonable royalty fee for the basic service of providing secondary transmissions of the primary
broadcast transmitter or is otherwise unreasonable, the Tribunal may change the royalty rate or the
revenue basis on which the fee is assessed or both to assure reasonable royalty fee. This section makes it
clear that neither the rates nor the rate base on which they will be calculated is fixed, but may be changed
very shortly.
648
Section 802 requires the Register of Copyrights to give notice on July 1, 1975 of proceedings to
review royalty rates prescribed by Sections 111, 114 and 115. During the year 1982 and every fifth year
thereafter, petitions for adjustnnent of the rates may be filed.
Section 803. If the Register of Copyrights determines that there is a controversy on distribution of
fees or gives notice of significant interest of a petition under Section 802, he shall request the American
Arbitration Association to submit three names to which objections can be filed. If no objections are filed,
it will constitute a panel of the Tribunal to function as the Tribunal. If objections to members are well
founded, additional names shall be requested and the Tribunal then constituted. There is no provision for
appeal to the Courts. Three arbitrators unskilled in this area will effectually control rates and the rate
base.
Section 806 provides for a report of a Tribunal decision to the Senate and House and Section 807
provides that, if either House resolution, within 90 days, does not favor the decision, it shall not become
effective. If no resolution of disapproval is passed, the Tribunal decision shall become effective.
Section 809 does not provide for any judicial review of the Tribunal's decisions on royalty rates.
SUMMARY
In brief. Section 106 makes cable television systems, when performing as a community antenna,
fully liable as an infringer when distributing copyrighted programs on signals received from television
stations. Exceptions from liability are provided for master antenna, teaching or instructional activities,
common and other carriers and nonprofit co-ops. CATV is given a compulsory license to carry radio, local
and other signals authorized by the FCC.
Nevertheless, it is an infringement if carriage of a signal is not permissible under FCC rules or the
appropriate notice is not filed with the Office of Copyright. This provision is a real sleeper because it will
give copyright protection and penalties both civil, criminal and injunctive to the broadcaster if CATV by
accident or otherwise fails to nonduplicate a network or syndicated signal or in any other way carries a
signal not permitted by the FCC rules. In addition, over-the-air carriage of pay-TV is fully actionable
unless cleared by the owner of the copyright. QUERY: May the broadcaster clear programs — apparently
not — he can only sue.
A sliding scale of across-the-board fees is prescribed on basic services which must be deposited
with the Office of Copyright quarterly. A hearing will be held in 1975 to consider both the rate base and
the rates to be paid to insure a "reasonable royalty fee", whatever that is. No standards are prescribed —
only the sujective idea of the three arbitrators will prevail unless disapproved within 90 days by one house
of Congress. There is no Court appeal to test whether the record supports the award.
Stiff civil and criminal penalties are provided for infringements. Broadcasters holding a license are
treated as a beneficial owner within their local service area for purposes of instituting an action for in-
fringement.
A Copyright Royalty Tribunal is formed. Panels of the Tribunal are appointed from the American
Arbitrator Society. The rates prescribed in Section 1 1 1 (d) (1 ) and the rate base (basic subscriber service)
will be reviewed in 1975 and again in 1982 and every five years thereafter to assure the copyright owner a
"reasonable royalty fee."
Ill — THE PUBLIC SHOULD NOT PAY A COPYRIGHT FEE VIA CATV
It is clear that the Register of Copyrights makes his whole case for CATV copyright liability
on the fact that CATV charges its subscribers and makes a profit and failure to share these profits could
damage the copyright. The Supreme Court disagreed with these assumptions and found otherwise in
TelePrompTer Corp. v. CBS, Inc., supra n.l. If the Register's theory of liability is correct, which it is not,
then anyone who makes a profit, directly or indirectly, from a performance of a copyrighted work should
be liable. This liability would run to wire and receiver manufacturers and countless other business
enterprises which enable the public to view the performance. Moreover, this theory assumes that the re-
transmission of a television signal by CATV is a performance which the Supreme Court of the United
Sates, on two occasions, has held that is is not. Mr. Arthur Krim, in his testimony before Subcommittee
No. 3, House Judiciary Committee (Hearings on H.R.4347, P. 1334, June 24, 1965), attempted to justify
the assertion that carriage of programs by CATV would seriously damage the copyrighted work by refer-
ring to the importation of distant signals. Neither Mr. Krim, the Register of Copyrights, or anyone else
has attempted to show that the reception of a signal carrying a copyrighted work off-the-air in an area the
television station is obligated to serve and for which the copyright owner has been compensated in any
way damages the future runs of the work, the broadcaster or anyone else. As we have shown, the
Supreme Court found Mr. Krim's contention erroneous.
The fact that CATV makes a profit, by assisting the TV station to deliver its programs to the public
649
it is obligated to serve and for which the copyright owner has been paid, has no bearing on whether CATV
should Day copyright. CATV services keeps the copyright owner honest by delivering the signal carrying
his program to the public for which he has been paid. In February 1965, in my remarks before the Inter-
national Radio and Television Society, I stated;
"At the present time, a sponsor who buys a program usually pays the
copyright owner for one performance over one or more stations. The spon-
sor pays the copyright owner, directly or indirectly, for tickets to the show
for everyone within the Grade B contour of the stations televising it and as
far beyond that contour as it can be received. This cost is passed on to the
public eventually in the purchase price of the product.
"It is a scientific fact, recognized in the Sixth Report and Order, however, that
over average terrain only 90% of the locations in the Gads A contour receive
an adequate signal 50% of the time, and within the grade B contour only
70% of the locations receive an adequate signal 50% of the time. I will
venture that most sponsors paying for a program think they are getting a
potential of 100 % of the locations 100% of the time, but that just isn't so,
even though the copyright owner is probably collecting for 100% of the
locations 100% of the time.
"A community antenna television system within the Grade B contour
merely aids the sponsor in getting his moneys worth from the copyright
owner and the station by assuring the sponsor that anyone who desires the
signal will receive it clearly, and thus increase the potential audience. Cer-
tain copyright owners are not satisfied with this. They collect from the
sponsor who recovers his cost from the public and they would like to collect
again from the CATV operator who must also pass his cost on to the public.
Some way or other it does not seem right to me for the public to have to pay
for 'two tickets to the same performance ."
No one has attempted, to my knowledge, since that time to refute this argument.
There is an additional factor relating to the question of "profits". Although early figures breaking
down program expenses for television were not published, it is significant that the television industry, as
a whole, was reported in 1952, by the FCC, to have had revenues of $323,266,000 and expenses of
$267,902,000. In 1973, the Com.mission reported that 604 VHF and UHF stations expended 218,266,000 for
film and$64.749.000for royalty and license fees for a total of $283,015,000. The three networks expended
$624,430,000 in amortization expense on programs obtained from others; $3,128,000 for records and
transcriotions; $7,248,000 for music license fees and $75,467,000 for other performances or program
rights. It is difficult, if not impossible to estimate the actual copyright fees received because of the
intermixture of other program costs with copyright. It is obvious, however, that because of television the
28 companies that control, almost 100% of copyrighted fare on television, have made huge profits (of
which 85% we are told, comes from the top 50 markets) from that exposure and have been paid hand-
somely by the public through the broadcaster for programs dedicated to serve that same public. Why
should the copyright owner, these 28 companies, f^r. Krim spoke of in 1965 and a few others that may
have since joined tnem, be entitled to "siphon off" duplicate copyright fees from the public under the
guise that CATV makes a "profit" and these companies are entitled to "a piece of the action"?
Those facts should demonstrate conclusively that the copyright owner giants (1 ) by virtue of their
access lo the air, (2) with no cnarges by the Government to transport their product to the public (3) com-
pared to CATV comoanies which pay up to $10,000 a mile for their channels of communication to
subscribers, should certainly be required to forego double fees from a reception service for the public.
The small number of copyright owners who dominate this area should certainly be required to give some-
thing back to the public in return for using the public domain for what are obviously huge profits. Cable
television or its advertisers will pay for any programs it siphons from broadcast television, whereas the
public would receive nothing for the cash the broadcasters would have the copyright owner siphon from
the public via CATV.
There is a basic conflict between communications policy and any copyright law in which a cable
antenna system is required to pay copyright on any signal it is authorized to receive and distribute on its
system by the Federal Communications Commission.
The Court has construed the Communications Act to empower the Commission to regulate CATV.
In exercising this power, the Commission requires, as a condition ot receiving and carriage of television
broadcast signals, that CATV systems must carry all local signals. The definition of local signal varies
according to the size market wfiere the system is located. Nevertheless, the Commission exercises its
power to require carriage of certain signals and permits the carriage of others. Such regulations now
constitute CATV a supplemental service to make the Commission's allocations of frequencies more
effective. Until set aside, revised or revoked, CATV systems must comply with those carriage rules.
650
The proposed legislation would compel CATV to pay copyright owners for distributing signals
carrying their copyrighted works. The broadcaster has the right to pick and choose the copyrighted works
he will buy and broadcast. Congress should set the record straight. If the Commission is confirmed In the
power to require carriage of particular signals by CATV, than CATV is a supplemental reception service,
performs nothing, and owes nothing. If it is desired to require copyright payment by CATV for its
supplemental role, then CATV should be entitled to carry whatever programs it desires, delete the ad-
vertising and substitute its own. The broadcaster should not be permitted to have it both ways — collect
additional revenue from sponsors for the added carriage of CATV and require CATV to pay copyright fees.
In short, the broadcaster is arguing for the morality of unjust enrichment to copyright owners at the
expense of the public CATV serves as a means of using copyright to restrict the growth of CATV. It is the
public who will unjustly enrich the broadcaster and/or the copyright owner — not the CATV operators.
These anti-consumer provisions should not be enacted into law.
IV — CONCLUSION
Based on the foregoing review of the background and the provisions of this legislation, it must be
concluded that the provisions of S. 1361 concerning CATV are philosophically unsound. An across-the-
board payment, including payment by the public for two tickets to the same performance or for distant
signals as limited by the Commission's rules, is, in my opinion, soaking the consumer and will add to an
already inflationary economy. I believe that you are justified and should revert to the industry's historical
position and make every effort to seek an amendment to this bill, substantially as recommended in 1965
(supra n.1), to eliminate any liability under Section 106 or other provisions of S. 1361.
The Subcommittee on Communications of the Senate Commerce Committee, in its Report No.
93-1035 on S. 1361, proposed certain amendments to the bill. In conclusion, the subcommittee stated
on page 71 :
"Despite proposing amendments to the Judiciary Committee's amend-
ment in the nature of a substitute for S.1361, you Committee emphasizes
it is reporting the bill out without recommendation.
"Clearly, some of its subject matter substantially affects the broadcast-
ing and cable industries, and is regulatory in nature.
"Should it be enacted it will have a significant impact on our nationwide
communications system, without the relevant issues having been analyzed
in the forum designated the Senate for that purpose, i.e. your Committee on
Commerce."
I have not undertaken to separate the regulatory parts of the bill from those properly in a copyright
bill. At a later time, this type analysis should be made in order to further demonstrate the inappropriate-
ness of the provisions of S. 1361 relating to cable television.
Frederick W. Ford
10
651
Ad Hoc Committee
OF Concerned Cable Television Operators
FOR A Fair Copyright Law,
Painted Post, N.Y., June 10, 1975.
Re H.R. 2223 — Omnibus Copyright Revision Legislation — Cable Television.
Hon. Robert W. Kastenmeier,
Chairman, Stibcommittce on Courts, Civil Liberties, and the Administration of
Justice, Judiciary Committee, House of Representatives, Washington, D.C.
Dear Congressman Kastenmeier : The Ad Hoc Committee of Concerned Cable
Television Operators For a Fair Copyright Law is enclosing herewith for in-
sertion in the records on the current Hearings on the above-referenced legisla-
tion the following :
1. Listing of State and Regional cable television associations that have adopted
resolutions against the payment of copyright fees by cable television systems.
2. Copies of resolutions passed by 53 municipalities in the United States against
the payment of copyright fees by CATV systems and indirectly the United
States public that happens to view their television on CATV systems.
It is pertinent to note that no municipalities in the United States have voted
in favor of having CATV systems pay copyright. It would obviously not be logical
for them to do so because the cost of the copyright fees will be passed on to the
subscribing U.S. consumers. Obviously they know it would not be popular or even
intelligent to adopt such a position. This .special interest legislation would in
effect require the American consumer to pay special copyright fees for viewing
programming that has advertisements attached to it. Such "pork barrel" legisla-
tion is clearly not in the public interest.
You will note that to date 23 states have otficially adopted resolutions against
the payment of copyright fees by CATV systems. CATV operators are essen-
tially providing an "antenna service". As such, CATV operators do not understand
this entire issue of copyright. However, as CATV operators become more and
more aware that they will have to pay copyright fees in the immediate future if
this disastrous legislation goes through, they are putting pressure on individual
state associations to officially adopt positions against the payment of copyright.
The only people that are for the payment of copyright are the large multiple
system owned CATV operators that control the National Cable Television Asso-
ciation. These operators feel that the Federal Communications Commission will
continue to enact disastrous legislation in our industry if this copyright i.ssue is
not settled. We agree that it should be settled. But we also feel tliat to agree to
pay copyright which we feel is fundamentally immoral and anti-consumer is not
the appropriate course of action.
We hope that your Committee will consider in its deliberations on the proposed
copyright legislation the strong feeling of the municipalities that voted against
this legislation. Please also consider the feelings of all the state associations
representing approximately 1/2 of all the states in America that have taken the
trouble to adopt resolutions against this legislation as it relates to cable television.
Very truly yours,
Lawrence Flinn, Jr., Member.
Listing of State and Regional CATV Associations That Have Adopted a
"No Pay" Position on Copyright as of June 6, 1975
state associations
1. Alabama*
2. Arkansas
3. Colorado
4. Iowa*
5. Kentucky*
6. Louisiana
7. Minnesota*
8. New York*
9. Oklahoma*
10. Oregon*
11. Pennsylvania ^
Footnotes at end of listings.
652
12. Texas*
13. Virginia*
14. West Virginia
States Represented Thbough Regional CATV Associations
STATES represented AND NAME OF REGIONAL ASSOCIATIONS
15. Illinois, Illinois-Indiana CATV Assn.
16. Indiana.
17. Maryland, Maryland-Delaware CATV Assn.
18. Delaware.
19. Kansas, Mid- America CATV Assn.
20. Missouri.
Oklahoma (counted above. Passed separate resolution).
21. Nebraska.
22. Colorado, Rocky Mountain CATV Assn.
23. Wyoming*
State Associations That Have Voted To Adopt the NCTA Position
ON Copyright
1. California.
2. Florida.
•Copy of resolution passed Is submitted herewith. The other resolutions have been
recently reported by telephone or in the press and copies of the related resolutions passed
will be obtained and copies will be submitted to Congress.
1 Would pay copyright on distant signals only beyond basic complement of 7 TV signals.
(3 nets, 1 ETV, & 3 Independents),
653
AD HOC COMMITTEE
OF CONCERNED CABLE TELEVISION OPERATORS
FOR A FAIR COPYRIGHT LAW
BOX 389
PAINTED POST, NEW YORK 14870
TELEPHONE 607 962-3890
July 3, 19 75
Hon. Robert W. Kastenmeier
Chaiirman, Subcoiranittee on Courts, Civil
Liberties, and the Administration of
Justice
Room 2 2 32
Rayburn Office Building
Washington, D.C. 20515
Re: H.R. 2223 - Oninibus Copyright Revision Legislation -
Cable Television
Dear Congressman Kastenmeier:
In reference to our letter to you dated June 10, 19 75,
enclosed herewith is a resolution passed by the City of
Bellaire, Ohio requesting Congress to remove any provision
requiring the payment of copyright fees by cable television
systems from the above referenced legislation.
Please include the enclosed document in our previous
filing for insertion in the records for the current deli-
berations on this proposed legislation. Thank you for
your help in this matter.
Very truly yours,
THE AD HOC COMMITTEE OF
CONCERNED CABLE TELEVISION
OPERATORS FOR A FAIR COPYRIGHT
LAW
JIS :mc
Enclosures
cc: Members of the House Subcommittee on Courts,
Civil Liberties and the Administration of Justice
57-786 O - 76 - pt.l - 43
654
RESOLUTION NO. V^^.
RE: OMNIBUS COPYRIGHT REVISIOf T.EG; . .--'iTTON - Cv.'-.:: TELEVISIC.
WHEREAS, th>^ master of lia Lity of cable ^r-Lcvision ope cors
and, through them cable subscribers to pay copyright royaltie
television signals carried on cable television is now before .
Congress of the United States in the Omnibus Copyright Kevisic ..
Bill;
WHEREAS, the 1974 annual rrioeting of the United States Co- ■.■r).CQ
of Mayors in San Diego did unani-:^ously approve Resolution ITunv- .
urging the United States Senate not to adopt legislation v/hicr " i
place an extra surcharge on the viev/ing oc te' evision program:-
via a cable television system;
WHEREAS, this resolution v.aa ignored and .lad no effe- or
action of the United States Senate in tr.2 y -' --mher 9th ^ ac
Senate Bill S.1361;
Vv^iEREAS, the United States Suprer j "oii,:c has twice h t
carriac of broadcast signals by cable television is not ei ance
under '>-deral copyright law for which copyright royaltie e
quired to be paid; and
WHEREAS, as a matter of pure logic and economic thee- , p ..ent
of copyright royalties for carriage of broadcast signals c. ca
television is improper and can result in consumers payi.^ py -.t
royalties twice;
WHEREAS, the cable television induf.^ry, still in i .f^ : ^a..
should not be overburdened with required fees and chargi;-;, ."^ayr. '
of which must be subsidized by the ultimate consumer, the c'blc-
television subscriber;
WHEREAS, the continuation of quality cable television jer\
in and for the community of Bellaire, Ohio, is important to the
well-being, education, and informed status Qf our citizens;
WHEREAS, adoption of this copyrigh. legislation by the ful
Congresc cf the Ur.i'_c:d States will fce iwriationary and will
selectively "tax" the cable viewing residents of Sellaire, Ohio
NOW, THEREFORE, BE IT RESOLVED, by the Council of the city ^z
Bellaire, Ohio:
§1. That the Congress of the United States is urged tc re:r--ve
from the Omnibus Copyright Revision Bilu. all language \i7hich \,'ou^
require a copyright payment for carriage: of broadcast signals on
cable television.
655
§2. Urges that the Honorable Jonn Glenn and Honorable Robert
Taft, Senators and Honorable Wayne L. Hays, our Congressman, do
everything within their power to defeat Senate Dill S.1351.
§3. That this resolution shall take effect and be in force
from and after the earliest period allowed by law.
Passed this 19 th day of Jung
Attest; C^~:i^r-rf/
Clerk of Council
,1975.
;o
President/y6f Cqifncil
Approved this 19th day of__i^^
,1975,
I Mayor
656
Mr. Kastenmeier. The Chair would now like to call George J.
Barco, general counsel for the Pennsylvania Cable Television Asso-
ciation.
Mr. Barco, you may proceed.
TESTIMONY OF GEORGE J. BARCO, GENERAL COUNSEL,
PENNSYLVANIA CABLE TELEVISION ASSOCIATION
Mr. Barco. First, may I point out here on the map what part of
Pennsylvania I come from, so that you know the place from which
I come.
Mr. Chairman and members of the Subcommittee on Courts, Civil
Liberties and the Administration of Justice — I purposely mention that
title because that is one of the reasons I'm here today because I believe
that the orbit of your jurisidiction can afford us some of the relief we
are seeking. Having seen you gentlemen on television in the execution
of your duty, I was reinforced in my belief.
Further, Mr. Chairman, I want you to know that we have a state-
ment here that is longer than the 5 minutes allocated to us, and we
would ask that it be included in the record. I have prepared my remarks
to fit within the time which has been allowed to me.
Mr. Kastenmeier. The Chair appreciates that, Mr. Barco, and your
statement and the Pennsylvania Cable Television Association policy
position statement of March 1975, will be received in the record.
Mr. Barco. Thank you, Mr. Chairman.
I am George J. Barco of Meadville, Pa. For the past 23 years I have
been a part owner and president of several cable television companies,
and I have served as general counsel for the past 20 years of Pennsyl-
vania Cable Television Association. Pennsylvania is the State where
commercial CATV started some 27 years ago, and where more com-
munities and a greater percentage of the television viewing public
secure reception by CATV service than in any other State.
For the past 10 years particularly, I have been concerned that the
views and concepts, and, in turn, many aspects of government treat-
ment accorded to the industry have been influenced to a great extent
by a pervasive preoccupation, inside and outside the industry, with
the technical and theoretical capabilities of cable television to provide
broad television and communications services.
This preoccupation has been obsessive to such an extent that the
financial, technological, and practical requirements for such an
evolution have not been fully analyzed, or recognized, on the one
hand, and, at the same time, the significance of the television reception
function being provided by CATV has been discounted and the real
nature of the service today confused and distorted.
The Pennsylvania position on copyright places the television recep-
tion function in clear focus and places that function in proper per-
spective, both with relation to the subscribers it presently serves,
and with relation to the capabilities for cable to improve and equalize
television reception opportunities for the public generally. The Penn-
svlvania position also recognizes the desirability of realizing the poten-
tial of cable television for providing increased program choices in part
through micro waving of additional signals, acknowledging that this
function is distinct from the television reception function, and that
657
providing such service may be subject to reasonable copyright
payment.
it is no secret that there is a fundamental and serious division
in the industry on the issue of copyright payment. The Pennsylvania
position in essence represents the view of a substantial segment of the
industry that is opposed in principle to the concept of across-the-board
copyright liability, and particularly, copyright liability for television
reception of signals received off the air.
The other substantial segment of the industry — and particularly on
the board of directors of the NCTA — has been willing, and even eager,
to agree to payment of copyright fees "across the board" in response
to an assortment of influences, including the appeal of an expedient
response to the pressure for copyright payment; the desperate hope
that such a commitment wdll evoke some response from the Federal
Communications Commission in the direction of relaxing its very
restrictive regulations of CATV; and the expectation that such pay-
ment from the existing industry will be the means of securing the
availability of microwaved signals thought to be a prerequisite for
the economic viability of cable television for the large cities and the
cable coimnunications industry of the future.
One measure of the extent of the division is that some 18 State and
regional associations have either drafted a resolution for action, or
have taken action, in opposition to the NCTA position of copyright
payment "across the board".
The basic principle of the Pennsylvania position that off-the-air
television reception should not be subject to the burdens and risks in-
volved in a commitment to copyright payment is founded on the
pertinent facts and circumstances. The broadcasters and copy-
right owners make use of the public resource of the airwaves without
payment.
In addition, the policy of the 1934 Communications Act favors the
widest possible distribution of broadcast services for the general bene-
fit and welfare of all citizens. As a consequence, there must accrue a
fundamental right in the public to utilize on an equal basis all signals
receivable off the air, whether by conventional rooftop antenna, or by
cable television.
I am unable in the time allotted to me to further detail the philo-
sophical and factual basis for the Pennsylvania position, and I have,
therefore, attached the position in full to this statement for the record.
In summary, the Pennsylvania position so far as payment of copy-
right fees is as follows :
One. No conyright fees should be pavable for television reception
of off-the-air signals, regardless of the total number involved.
Two. No copyriglit fees sliould be payable for basic television re-
ception, whether secured off the air, or by microwave. While we have
stated that basic television reception should include the national net-
w^orks, three independent television stations, and one educational tele-
\dsion station, we recognize that there is room for differences of
opinion as to what basic television reception should include.
Tliree. CoDvri,orht fees wouM be pavable on the recention of micro-
waved signals, other than those required for basic television reception
in two above, at the rate of two-tenths of 1 percent per microwaved
channel.
658
Another fundamental concern emphasized in the Pennsylvania posi-
tion is that the copyright bill not effect a confirmation of the present
FCC regulatory treatment of the industry. For example, the FCC
definition of so-called distant and local signals has little relation
to actual reception conditions for signals received off the air ; and the
application of these artificial and arbitrary definitions results in
unreasonable, unfair, and discriminatory treatment for television
viewers.
Finally, and most important, cable television viewers — comprising
10 million subscriber homes with over 30 million viewers — have never
been informed of the proposal for copyright pajanent for their tele-
vision reception service, while payment will not be required for the
same reception by their next door neighbor using a conventional roof-
top antenna. In this day of consumer concern and special awareness for
due process, the lack of fairness and reasonable treatment for cable
subscribers for television reception — both off the air and for basic
television service — is most evident, is not supportable, and certainly
should not be countenanced by this committee whose very title stands
as a beacon light for the citizens of our Nation for proper protection
of their basic rights.
Mr. Chairman and members of this committee, I have been a mem-
ber of the negotiating committee of the industry ; and I was party to
the consensus agreement. I should be very glad to answer any questions
you have.
Mr. Kastenmeier. Thank you, Mr. Barco. In that connection, when
the agreement was concluded in 1971, you were one of those who were
agreeable to the provisions ?
Mr. Barco. Absolutely not. There was a very strong division, then,
and we were told by the then Chairman of the FCC that this had to
be because it was demanded by the White House, otherwise we cannot
relax the rule. There had been a freeze on the industry, and the indus-
try was desperate. The manufacturers were going out of business, the
industry was at a standstill; and it was only by a two- vote majority
that that was carried and accepted by the board of our directors and
the officers of the association. There were very, verv violent arguments
about the whole thing. And, as Mr. Ford has pointed out, the other
factors shortly followed, so it was never given any credence by
anybody.
Mr. Kastenmeier. Off the record.
[Discussion off the record.]
Mr. Kastenmeier. Mr. Barco, we do have another witness whom
we will not be able to hear without returning. So, I will request that
we recess and then return durine: what would otherwise be the lunch
hour, and proceed with our last witness.
I propose we will return at 1 :45, after we vote, and conclude at 2
o'clock.
Mr. Barco. Mr. Chairman, before I am dismissed, may I please just
make one suggestion ? You note that our position provides that when
a signal is carried far beyond its normal area of operation
Mr. Kastenmeier. By microwave.
Mr. Barco. Yes. We believe that under some circumstances a copy-
right fee should be paid.
Mr. Kastenmeier. I was interested in this and hoped to question
you about this.
659
Mr. Babco. I will be glad to come back after lunch.
Mr. Danielson. If the gentleman can come back
Mr. Barco. I will be very happy to come back.
Mr. Kastenmeier. The subcommittee will be in recess for 15 min-
utes, until 1 :45.
[Whereupon, at 1 :30 p.m. a recess was taken until 1 :55 p.m.]
Mr. Kastenmeier. The subcommittee will come to order for the
resumption of our testimony today. When we recessed we were hearing
from Mr. George Barco, who had submitted his testimony, and was in
the position of anticipating a question of mine, to the position of the
Pennsylvania Cable Television Association, No. 3, that copyright fees
would be payable on the reception of microwaved signals.
What are microwave signals, in common parlance, so that we might
understand what that refers to ?
Mr. Barco. There are two types of signals in cable television systems
received and transmitted to their subscribers. One, what we receive nor-
mally over the air, and the other where we have to use microwave
operations, where you bring a signal by long distance with a series of
retransmitting of signals, reaching the ultimate destination. Now,
may I explain that ?
Mr. Kastenmeier. Yes.
Mr. Barco. I said we take three positions, as Your Honor will re-
member. First, anything "off the air" should pay no copyright because
it is a basic right of the American citizen to receive these broadcast
television signals. Number two, we said there is also a right to basic
television reception, regardless of how it is received, by the public.
Now, even though in Pennsylvania there is no need to have anything
except what we receive off the air — in any part of Pennsylvania — there
are some signals brought in by microwave from New York City, for
instance. But they are not needed for basic television reception except-
ing in those instances where we want it.
Now, we think there are some communities in the Midwest and
Far West where they cannot get the signals any way except by micro-
wave, but it is a very small number of communities. We think that
those people should be entitled to receive television reception, regard-
less of whether it's off the air, or by microwave, without the payment
of copyright because of the fact that it is important to the welfare of
our Nation to have everybody receive television reception. And we say
they should be able to receive the three networks, three independents,
and one educational station.
You might ask, why do we cite that number — this is the reception
provided to people in the large cities. Why should there be second-class
citizens in the smaller communities. Television reception in the small
communities, gentlemen, is more important than television reception in
the big cities because this is the most important thing they have outside
eating and sleeping.
Mr. Kastenmeier. In terms of the networks, the independent and
educational television stations, there is an FCC determination of what
constitutes a complete service within a market in terms of some con-
fign ration as to what type of network stations constitute
Mr. Barco. A market,
Mr. Kastenmeier. A fully served area. I guess this is somewhat
different.
660
Mr. Barco. Mr. Chairman, that definition is an artificial one, estab-
lished by the FCC. The amazing thing to us in the industry is that
they will give a license to a broadcaster to put a signal out in the air.
They can't restrict that licensed signal, where it goes. And then they
come and say to us, "Well, you can't carry it" even though we pick it
out of the air. They say, "You can receive this one, but you can't re-
ceive that one." Frankly, we can't understand it at all.
And the other thing we have to keep in mind, Mr. Chairman, is
that, if in the same community, if you use a rooftop antenna, you can
receive anything that is receivable off the air, like you do with the
CATV system. But the FCC comes and says to us, "If you have to
buy television reception service from a cable company, you can't bring
in but so many stations," but they make no such restriction on rooftop
antennas, regardless of the number of signals received.
Mr. Kastenmeier. Mr. Barco, do the members of your association —
and it is a very old one in Pennsylvania — differ in terms of their char-
acteristics, or types of programs, the type of transmitting they are
involved in, than the members of the national association that testi-
fied before?
Mr. Barco. No, generally not. I would say to you that from our
personal knowledge, we have about 60 systems which do cable casting,
which is local origination. Our system has been doing that for 8 years,
and we know a number of other systems who do the same thing.
Mr. Kastenmeier. Thank you. The gentleman from California,
Mr. Danielson.
Mr. Danielson. Thank you, Mr. Chairman.
Thank you, Mr, Barco. On cable casting for origination of programs
you do not question that copyright fees should be paid on that type of
program.
Mr. Barco. Absolutely not. And we do pay on those we buy.
Mr. Danielson. I just wondered whether you had any question
on that.
Mr. Barco. No, no question.
Mr. Danielson. Under the formula that you come up with here,
your three points, can you give me an estimate of how many CATV
systems would be paying copyright, and how many would not?
Mr. Barco. My recollection is that that was checked by the NCTA
Office, and they estimated about 750 systems would be paying copy-
right, that is if they brought it in by microwave beyond, off the air.
Mr. Danielson. I understand. Well, 750 — how many systems are
there?
Mr. Barco. Altogether around 3,000.
Mr. Danielson. About 25 percent ?
Mr. Barco. But you must keep in mind, Congressman, that 89 per-
cent of the top 100 market, or 89 markets rather, have not been
developed for CATV, and this is where the play is going to come in
because they think that they are going to develop those markets by
bringing in the distant signals by microwave. And when they get
beyond the basic television reception, then they will have to pay.
And of course, that is all based on the proposition that when you
bring in a signal by microwave, there has not been any compensation
to the copyright owner. If he is being compensated because he knows
about it, then of course we don't think there should be double pay-
ment. But if he hasn't been paid, it's only right that he should be paid.
661
Mr. Danielson. I think I understand your position, thank you, very
much.
Mr. Kastenmeier. The gentleman from Illinois, Mr. Eailsback.
Mr. Railsback. No questions, thank you.
Mr. Kastenmeier. The gentleman from New York, Mr. Pattison.
Mr. Pattison. No questions.
Mr. Kastenmeier. The gentleman from California, Mr. Wiggins?
Mr. Wiggins. Are the microwave signals beamed to a receiver?
Mr. Barco. To a receiving antenna.
Mr. Wiggins. I mean to a specific customer ?
Mr. Barco. Yes, the customer in this case being the CATV system.
Mr. Wiggins. It's not from the air, that is.
Mr. Barco. Oh, no, you have to have a special pickup.
Mr. Wiggins. In those systems in Pennsylvania that have some
experience in cable casting, which is a word describing the origination,
I think
Mr. Barco. Local origination.
Mr. Wiggins. Has there been difficulty in obtaining financing for
those stations by reason of the fact that they are, or should be liable
for copyright payments ?
Mr. Barco. No. You see, those systems, of course, have two types
of programs, the cable casting. No. 1, a locally originated program;
and then they have these other programs that they buy. They go on
the marketplace and negotiate the price as broadcasters do. We have
had no problems in that respect at all.
Mr. Wiggins. That's all.
Mr. Kastenmeier. Thank you very much, Mr. Barco, for your
testimony here today. I am sorry we kept you so long.
[The prepared statement of George J. Barco, and the Pennsylvania
Cable Television Association Policy Position follow :]
Statement of George J. Barco, General Counsel, Pennsylvania Cable
Television Association
Mr. Chairman, members of the subcommittee, I am George J. Barco of Mead-
ville, Pa. For the past 23 years, I have endeavored to participate actively and
positively in the deliberations of the cable television industry leadership on the
various issues affecting it nationwide.^ During this time I have been a part
owner and president of several cable television companies, including the one
serving the community in which I live. Also, I have served as General Counsel
for the past 20 years of Pennsylvania Cable Television Association, the state
association of the cable television industi-y in Pennsylvania where the CXTV
industry was born as a commercial enterprise some 27 years ago and where
more communities and a greater percentage of the television viewing public
secure reception by CATV service than in any other state.
During this period, I have been personally and directly acquainted with the
natirre and development of the industry itself and have observed the changing
views and concepts of others toward the industry. I have been concerned, again
and again, particularly during the last 10 years, that these views and concepts,
and, in turn, many aspects of government treatment accorded to the industry
have been influenced to a great extent by a pervasive preoccupation, inside and
outside of the industry, with the technical and theoretical capabilities of cable
television to provide broad television and communications services. This pre-
occupation has been obsessive to such an extent that the financial, technological
and practical requirements for such an evolution have not been fully analyzed
1 National Chairman [then known as Prpsident]. National Cable Television Association,
1957; Member, Board *of Directors of NCTA. 15 Tears endlnc In 1972: Member. NCTA
Convricht Neffotiating Committee, 1972-1975 ; Member, NCTA Music Copyright Nego-
tiating Committee, 1972-1975.
662
or recognized, on the one hand, and, at the same time, the significance of the
television reception function being provided by CATV have been discounted and
the real nature of the service today confused and distorted.
Time and again it has been acknowledged by the Federal Communications
Commission, the broadcasters and the copyright owners themselves that the
master or community antenna television reception function which the CATV
industry was established to perform, does not interfere with or encroacli upon
the respective interests of broadcasters and copyright owners, because the service
is supplementary to, and supportive of, broadcasting and corrective of some of
the technical limitations of the technology. Regardless of all of the talked about
hopes, dreams and promises for cable, it is a central fact that cable as it exists
today represents only a concept of the ultimate cable commimications technology,
and the implementation of that concept requires tremendous expenditures of
time and money with very considerable risks, uncertainties and unknowns.
The Pennsylvania Position on copyright places the television reception function
of cable television in clear focus and places that function in proper perspective,
both with relation to the subscribers it presently serves, and with relation to
the capabilities for cable to improve and equalize television reception opportuni-
ties for the public generally. The Pennsylvania Position also recognizesi the
desirability of realizing the potential of cable television for providing increased
program choices in part through microwaving of additional signals, acknowledg-
ing that this function is distinct from the television reception function, and that
providing such service may be subject to reasonable copyright payment.
I must emphasize that the Pennsylvania Position represents not merely an
expedient response to the various pressures for the resolution of the copyright
issue for the industry, nor does it represent an effort to limit or reduce the extent
or amount of copyright payment motivated by business self-interest. It is pre-
sented rather as the right, logical and equitable resolution of the issue in view
of the true nature of the functions concerned and the over-all public interest in
them.
The Pennsylvania Position was originally developed by the Pennsylvania
Cable Television Association in 1969 and reviewed and refined by it in March
of 1975 [with much time and consideration being given to the issue by a broad
base of Association membership in both instances]. However, its adherents are
not limited to Pennsylvania, for it has wide acceptance across the nation.
It is no secret that there is a fundamental and serious division in the industry
on the issue of copyright payment. The Pennsylvania Position in essence repre-
sents the views of a substantial segment of the industry that is opposed in
principle to the concept of "across the board" copyright liability, and particularly,
copyright liability for television reception of signals received off the air.
The other substantial segment of the industry has been willing and even
eager, to agree to payment of copyright fees "across tlie board" in response to
an assortment of influences, including the api^eal of an expedient response to
the pressure for copyright payment ; the desperate hope that such a commitment
will evoke some response from the Federal Communications Commission in the
direction of relaxing its very restrictive regulations of CATV ; and the expecta-
tion that such payment from the existing industry will be the means of securing
the availability of microwaved signals thought to be a prerequisite for the
economic viability of cable television for the large cities and the cable communi-
cations industry of the future.
Although NCTA still ofiicially adheres to the views of this segment, its policy
in this respect has been seriously questioned and reviewed again and again, even
as late as May 23, 1975. In this regard, it must be taken into account that many
members of NCTA have interests in television broadcasting and copyright hold-
ings which are to some extent clearly in conflict with CATV interests as such. It
is my opinion that the position of NCTA on copyright has been definitely weighted
and influenced by these interests and still is today.
One measure of the extent of the division is that some 18 state and regional
associations have either drafted a resolution for action, or have taken action, in
opposition to the NCTA position of copyright payment "across the board." I
believe that a clear plurality if not majority of cable operators throughout
the country are opposed to copyright payment for signals received off the air
and are convinced that payment for these signals is not reasonable.
The basic principle of the Pennsylvania Position that off the air television
reception should not be subject to the burdens and risks involved in a commit-
ment to copyright payment is founded on the pertinent facts and circumstances.
663
The broadcasters and copyright owners make use of the public resource of the
airwaves without payment. In addition, the policy of the 1934 Communications
Act favors the widest possible distribution of broadcast services for the general
benefit and welfare of all citizens. As a consequence, there must accrue a fun-
damental right in the public to utilize on an equal basis all signals receivable
off the air, whether by conventional rooftop antenna or by cable television.
Again, since the copyright owners choose to distribute their property by broad-
casting, there is no reasonable basis for any expectation by them that they
should control or limit the distribution as if they were providing for a perform-
ance in a theater, arena or hall.
From the point of view of the subscriber, it is incomprehensible that liability
to copyright fees should depend on the accident of topography — or in the real
life situation of the television viewer — whether he is living in a high area where
a conventional antenna provides adequate reception or whether he lives behind
the hills or along the river where CATV service is required or desirable to pro-
vide satisfactory television reception. These reception conditions can change
from street to street in a given community.
A correlating basic principle of the Pennsylvania Position is that inasmuch as
CATV can provide the means for equalizing the television reception opportunity
for all the viewers, thereby correcting a limitation or deficiency in broadcasting
technology, service for at least basic television reception should not be subject
to copyright, by whatever means reception is secured.
I ani unable in the time allotted to me to further detail the philosophical and
factual basis for the Pennsylvania Position, and I have, therefore, attached the
Position in full to this statement for the record.
In summary, the Pennsylvania Position so far as payment of copyright fees is
as follows :
(1) No copyright fees should be payable for television reception of off the air
signals, regardless of the total number involved.
(2) No copyright fees should be payable for basic television reception, whether
secured off the air or by microwave. While we have stated that basic television
reception should include the national networks, three independent television sta-
tions and one educational television station, we recognize that there is room for
differences of opinion as to what basic television reception should include.
(3) Copyright fees would be payable on the reception of microwaved signals
(other than required for basic television reception in (2) above) at the rate
of two-tenths of one percent per microwaved channel of the gross receipts from
monthly service charges only.
While not included in the Pennsylvania Position, I should mention that a num-
ber of individuals favoring the Pennsylvania Position have suggested that as an
alternative, fees could be based on the fee schedule in H.R. 2223, prorated
against the number of distant signals microwaved as the numerator over the
total signals carried as the denominator. Thus, if a system carried a total of ten
signals, three of which were microwaved and subject to copyright payment, the
system would pay three-tenths of the fee schedule.
Another fundamental concern emphasized in the Pennsylvania Position is that
the copyright l)ill not efifect a confirmation of the present FCC regulatory treat-
ment of the industry. For example, the FCC definition of so-called "distant" and
"local" signals has little relation to actual reception conditions for signals
received off the air ; and the application of these artificial and arbitrary defini-
tions results in unreasonable, unfair and discriminatory treatment for television
viewers.
To those who are concerned that the Pennsylvania Position may not provide
"enough" initial extra payment for copyright owners, I submit that the reason-
ableness of the resolution of the copyright issue is not determined by the size of
any additional copyright payment but by whether or not there is a proper basis
for payment. Furthermore, the copyright owners themselves over the years have
stated that their primary concern is not with the existing industry or in the off
the air television reception, but in the future of the industry in the 89 of the 100
top markets not yet developed.
The prevailing opinion is, and NCTA statistics establish, that these markets
can develop only by bringing in additional television signals by microwave and
by the purchase of much copyrighted programs for local origination. These mar-
kets also have the highest promise for the pay cable market, programs for which
will be purchased from copyright owners. In short, the copyright owners them-
selves will be the beneficiaries of tremendous gain from the increased distribu-
664
tion potential of cable for their copyright product — which will be many multiples
of any amount which could possibly be secured from the present industry on any
basis.
Finally and most important, cable television viewers — comprising 10,000,000
subscriber homes with over 30,000,000 viewers — have never been informed of the
proposal for copyright payment for their television reception service, while pay-
ment will not be required for the same reception by their next door neighbor
using a conventional rooftop antenna. In this day of consumer concern and spe-
cial awareness for due process, the lack of fairness and reasonable treatment
for cable subscribers for television reception — both off the air and for basic tele-
vision service — is most evident, is not supportable, and certainly should not be
countenanced by this Committee whose very title stands as a beacon light for
the citizens of our nation for proper protection of their basic rights.
Pennsylvania Cable Television Association Policy Position Update
ON Copyright
In October, 1968, the Board of Directors of Pennsylvania Cable Television
Association, after careful study and consideration, formulated a position on
copyright which was approved by the overwhelming vote of the members of the
Association at a special meeting held in April, 1969, together with background
explanation.
The background explanation for the position called attention to the distinct
difference, both in fundamental concept and practical objectives, between the
traditional community antenna television system which operates solely or mainly
to provide television reception service in fringe areas, and the much promoted —
but still largely undeveloped — cable communications system which is expected
to provide broad television and communication services, particularly in metro-
politan areas, including distribution of copyrighted programs purchased for
showing through the wired system.
The background explanation also particularly noted :
The United States Supreme Court decision in Fortnightly Corporation v.
United Artists Corporation, decided in June, 1968, in which service provided by
the traditional CATV system was held to be on the "viewer's side of the line" and,
therefore, not subject to copyright liability ;
The action of the Federal Communications Commission in its Proposed CATV
Rules and Inquiry, issued in December, 1968, which — among other things — in
effect, foreclosed the industry on the copyright question so far as new system
development is concerned and the expansion of system reception service in many
areas ;
The general precept that the community antenna television reception function
of providing off the air reception for television signals should not be colored in
its copyright and FCC regulatory treatment by the future potentials and possi-
bilities for CATV, or traded as an expedient to accelerate or to promote the reso-
lution of product and marketing problems which may be involved in the devel-
opment of some of these capabilities.
Based on these considerations, the central concept and principle of the "Penn-
sylvania Position" on copyright was set forth as follows :
To the extent that a wired system of any kind anywhere is performing the
television reception function of an antenna as the traditional CATV system, the
reception should not be subject to restrictions or to copyright liability any more
than reception by a conventional antenna and, accordingly, that there should be
no copyright payment for television reception provided of signals received off
the air.
Correlating principles were also set forth regarding the availability of "basic"
television reception service to all and regarding the desirability of exploring
the possible basis upon which microwaving of signals might provide increased
programming.
In the intervening period since the adoption of this position, the following
significant developments and occurrences must be taken into account as bearing
upon the copyright issue :
(1) The Federal Communications Commission has demonstrated conclusively
that with its rigid conditioning to the broadcasting environment of scarcity —
created by the inherent limitations in frequency allocations — its primary com-
mitment is to the existing broadcasting market order of things, with the accom-
panying characteristics of market monopoly and lack of program diversity. So
strong is the FCC's commitment and concern in this respect that it has been
665
supercautious in its restraint of CATV to assure that there is no possibility that
CATV will effect any change in the status quo.
This predilection was manifested most clearly in the FCC's action with regard
to the Consensus Agreement of November, 1971, which was notable not only be-
cause the FCC exacted the requirement of copyright payment as the condition
for any relaxation of its rules, but also because of the scant quantum of relief
given in exchange for this exaction. The nature and extent of the FCC's signal
carriage restrictions constitute a clear declaration of the FCC determination
that any development in CATV technology can occur only on the condition that
there be no change in the existing television broadcasting order.
(2) The extended negotiation efforts by representatives of National Cable
Television Association with representatives of the copyright owners have estab-
lished that the position and attitude of the copyright owners do not allow for
the usual business bargaining process, the demands of the copyright owners being
consistently exorbitant and unrealistic, and without regard for the consequences
either for the industry or the subscribing public.
(3) In addition to the restraints placed by the FCC rules on CATV television
reception services, and in turn on catv system development and growth, the 1972
Rules as related to local franchising, taken with the related actions of state
and/or municipal governments, have resulted in a multi-structured regulation
of CATV which is duplicative, inconsistent, costly and most burdensome.
(4) While the bright promise of the potential and capacity of cable television
has not dimmed, special difficulties have been encountered in system construc-
tion and operation in large and metropolitan city areas, and the feasibility and
acceptance of CATV service in such areas are yet to be established.
(5) In keeping with the earlier expressed opposition of the United States
Department of Justice to the extension of copyright liability of CATV because of
the harmful anticompetitive consequences and because the extension is not justi-
fied by the appropriate considerations for copyright protection, the Department
of Justice in its December, 1970, filing before the FCC concluded that CATV's
not paying for retransmission of broadcast signals is not unfair competition and
the FCC's attempted application of this concept in the circumstances has ob-
scured the basic policy issues presented.
(6) The United States Supreme Court in Teleprompter Corporation v. Colum-
bia Broadcasting System, Inc., decided in March, 1974, extended the United Art-
ists decision in holding that : "By importing signals that could not normally be
received with current technology in the community it serves, a CATV system does
not, for copyright purposes, alter the function it performs for its subscribers.
When a television broadcaster transmits a program, it has made public for simul-
taneous viewing and hearing the contents of that program. The privilege of re-
ceiving the broadcast electronic signals and of converting them into the sights
and sounds of the program inheres in all members of the public who have the
means of doing so. The reception and rechanneling of these signals for simultane-
ous viewing is essentially a viewer function, irrespective of the distance be-
tween the broadcasting station and the ultimate viewer."
Against the perspective of these developments and occurrences, the soundness
of the central concept and principle of the Pennsylvania position on copyright has
been confirmed. Furthermore, the application of this concept and principle must
be reinforced and supplemented in view of the broad and long-term implications
of any departure from them, both in terms of the consequences to basic televi-
sion reception service and to the development of cable communication services.
Concerning the television reception function of CATV, an overriding and funda-
mental public interest concern must be that basic television reception for every-
one should be free and not subject to the burdens and risks involved in a commit-
ment to copyright payment.
This concern gives strong reinforcement to the principle that television recep-
tion service for signals off the air should not be subject to copyright payment,
simply because of the CATV means used to receive them. On the other hand, inas-
much as CATV and related technology can provide the means for equalizing the
television reception opportunity for all viewers, thereby correcting a limitation
or deficiency in broadcasting technology, service for at least basic or minimum
television reception should not be subject to copyright payment, by whatever
means reception is secured.
To the extent that reception is being provided by CATV of signals received off
the air or to furnish basic television reception, there is no proper basis whatever
upon which there can be any complaint or objection by any broadcaster or copy-
666
right owner, since such reception is substantially in keeping with the present
marketing order.
Concernmg the potential of CATV systems for increasing program choices, in
part through the microwaving of distant signals, a number of policy and practical
situations come into play, and all of these strongly indicate that there should be
no copyright payment for such reception. In addition to the reasons in support of
this conclusion in the CBS case and in the Justice Department position to which
reference has been made, it is generally accepted that the copyright owners (who
use the public resource of the airwaves without cost) have no right to impose an
absolute control on the distribution of the copyright property which they choose
to distribute by broadcasting.
At the same time, it is also generally accepted that a method can be developed
whereby copyright owners can be fully comiiensated for the actual exhibitions
and performances of their property, without the necessity of restricting or bur-
dening CATV systems or services — which may well be the means for dramatically
increasing the disti'ibution possibilities for copyright proiDerty. Finally, there is
a public interest in encouraging the investment of the huge capital commitments
required for the construction of CATV systems with their greatly increased com-
munications capacities, and also in encouraging the utilization of these capacities.
Recognizing that such microwaving may require some marketing adjustments
and to respond by way of compromise to the overall objections of the broadcasters
and copyright owners, a payment of two-tenths of one per cent per channel of the
monthly service charge gross receipts would apply in exchange for a compulsory
license for such reception.
With regard to both of these aspects of CATV, it is essential that the resolu-
tion of the CATV copyright issue not include a confirmation of the nature and ex-
tent of regulation undertaken by the Federal Communications Commission over
cable television or of its present rules governing CATV. The copyright law should
include no provision regarding the regulation of CATV which must be a matter
of separate congressional legislative determination.
In summary, the policy position update on copyright is as follows :
I. No copyright fees should be payable for television reception of off the air
signals provided by a CATV system to subscribers, with such service to be specifi-
cally exempt from copyright.
II. No copyright fees should be payable on reception provided by a CATV sys-
tem to its subscribers of at least basic or minimum television reception, consisting
of reception of the national networks (at this time three), of three independent
television stations and of one educational television station, whether reception is
secured off the air, by microwave or other means, with such service to be spe-
cifically exempt from copyright.
III. A compulsory license for reception of microwaved signals (other than
required for minimum reception service as described above) should be granted,
for which there should be a payment of two-tenths of one per cent per microwaved
channel of the gross receipts from monthly service charges only. This rate should
be statutorily fixed and payable into a copyright pool, to be distributed by an
equitable formula.
IV. There should be no restriction or interference by the Federal Communica-
tions Commission with regard to any of the above services.
Finally, in any resolution of the copyright issue, there must be a recognition of
the interests of the CATV subscribers, who up to this date have never been in-
dependently represented in any of the hearings and discussions on the subject and
who have never had an opportunity to be heard. CATV companies should under-
take the responsibility of fully informing subscribers of the various aspects of
the issue in the course of the legislative process, particularly if copyright pay-
ment must be added to the service costs paid by the subscriber.
Mr. Kastenmeier. The Chair would now like to call Mr. William
Bresnan who is the president of the Cable Television Division of Tele-
prompter Corp.
Mr. Bresnan, we apologize for the delay in reaching you this morn-
ing, but we are interested in the subject. I see you have a prepared
statement which is not particularly lengthy, you may proceed from it.
667
TESTIMONY OF WILLIAM J. BRESNAN, PRESIDENT, CABLE
TELEVISION DIVISION OF TELEPROMPTER CORP.
Mr. Bresnan. Thank you very much.
Good afternoon, I am William J. Bresnan, senior vice president of
Teleprompter Corp., and president of our Cable Division. Tele-
prompter is the Nation's largest cable television company, having
approximately twice as many cable television subscriber as the second
largest company.
On my right is Jay Ricks, a partner in the firm of Hogan & Hartson.
On my left is Jacqueline Da Costa, director of Media Information and
Analysis at Ted Bates & Co., and to her left is Barry P. Simon, Tele-
prompter's vice president and general counsel.
Teleprompter's position on copyright is straightforward. We believe
cable television systems should not be required to pay any copyright fee
for the carriage of broadcast signals.
To understand this position, it is necessary to understand a basic fact
about the broadcast industry — a fact which makes that industry unique
among all other distributors of copyrighted materials. The broad-
caster, unlike the movie producer or the book publisher, does not sell a
copyrighted product. What the broadcaster sells is the attention of the
viewers. The purchaser is the advertiser. The more viewers the broad-
caster can deliver to the advertiser, the more the advertiser will pay.
And the more the advertiser pays, the more money is available for the
broadcaster to pay the copyright owner.
Cable television affects this relationship only by enlarging the audi-
ence available to the broadcaster. In many cases this actually increases
the advertising revenues available to pay the copyright owner. In no
case does it deprive the copyright owner of anything to which he is
entitled.
Thus, a cable system operator is not like a record pirate, as has been
previously questioned in this hearing, rather, he is more like a network
affiliate. And a network affiliate, I might add, actually receives compen-
sation from the network for expanding the network market area.
I would like to cite two examples. First, imagine a television station
located in a community part of whidh is in a valley where television
reception is poor. Imagine also that a cable television system offers its
service to the people of the community. The people who live in the val-
ley have three choices :
One, they can install a rooftop antenna to watch the programs broad-
cast by the television station ;
Two, they can subscribe to the cable television system and thereby get
the benefit of the antenna tower erected by the cable television sys-
tem; or,
Three, they can do neither and simply not watch the TV station's
programs.
As the Supreme Court has twice recognized, choices 1 and 2 are func-
tionally identical. Since no copyright liability attache's when the viewer
erects his own antenna, why should there be any liability when the
viewer avails himself of the antenna tower erected by the cable tele-
vision station?
668
It is no answer to say that the cable television system makes — or at
least tries to make — a profit out of providing its service, for clearly the
antenna manufacturer — like the television set manufacturer and
numerous other third parties in television-related businesses — also
seeks to make a profit.
Before going on to the second example, lefs pause for a moment to
consider alternative 3, where the prospective viewer neither buys the
tall antenna nor subscribes to the cable service but simply doesn't
watch the programs broadcast by our hypothetical television station.
If this happens, what is the result ? The station has a smaller audience
and therefore its advertising spots are less attractive to potential adver-
tisers. So, the station gets less money. And this means there is less
money available to the station to pay the copyright owner. From this
we can see that cable television, far from stealing from the copyright
owner, by increasing the size of the broadcaster's audience actually
increases the moneys paid to the copyright owner.
Now, consider a second situation. In this case, imagine a television
station in New York City whose programs are imported via microwave
hops — by a cable system and retransmitted over the cable to the cable
television system's subscribers in Oswego, New York, AVho otherwise
would not be able to receive the New York City station.
Is this situation really any different from our first example ? Is the
copyright owner somehow damaged by the action of the cable station?
Is he, perhaps, deprived of the ability to exploit his creation in Oswego
after it has been seen there on the cable ?
The answer to all of these questions is, no. Because of the nature of
broadcast economics, the copyrig^ht owner cannot be injured by the
cable system's importing the New York City station into Oswego. And
this is true even without consideration of the complicated FCC exclu-
sivity rules which seek to give added protection to the copyright owner
and which may require the cable system to delete programing so as to
allegedly protect the copyright owner's markets.
As in the first example, by showing the imported programs in
Oswego the cable system increases the audience of the New York City
station. And this is not just a theoretical increase. The rating services —
Nielsen and ARB — spend large sums of money to keep track of cable
subscribers with the result that every single cable subscriber is ac-
counted for in their surveys and so finds his way into some television
station's rate card. Thus, by simply checking in Nielsen we find, for
example, that in San Luis Obispo County, Calif., 30 percent of the
television homes view the Los Angeles independent and network sta-
tions on a regular basis; in Grant County, N. Mex., 51 percent of the
television homes view El Paso on a regular basis; in Chemung
County, N.Y., 19.5 percent of the television homes view the New York
City independent stations on a regular basis; in Lane County, Oreg.,
20 percent of the television homes view the Portland independent and
network stations on a regular basis; and in Sweetwater County, Wyo.,
81 percent of the television homes view the Salt Lake City network
stations on a regular basis.
In these cases, and in countless others, such coverage would be im-
possible without cable television.
This fact has not been lost on the broadcasters. For example, the
literature put out by the Association of Independent Television Sta-
669
tions, in text accompanying these illustrations in which the white
areas — excuse me, Barry, would you point out, please
Mr. Simon. In New York, for example, it's right here,
Mr. Danielson. Would the witness go on the other side, please?
Mr. Simon. I'm sorry. In New York the black line goes like this.
Mr. Bresnan. The black line represents the perimeter of the local
television market as defined by the Association of Independent Broad-
casters. I would like to quote from the text that accompanies those
drawings.
"The accompanying illustrations show how cable television can
dramatically increase the physical coverage area of independent sta-
tions, expanding their influence far beyond the perimeters of the local
television market.
"Advertisers on cable-connected independent stations share in this
expanded TV coverage reaching a bonus audience of consumers as
valuable to the national/regional advertiser as those situated within
the defined local market area."
As a further illustration of this point I have here a stack of bro-
chures; these are promotional brochures put out by the television
stations. Each one takes pains to point out that its audience includes
cable subscribers in distant markets. So we find that :
KTLA, an independent station in Los Angeles, claims a greater
potential audience than any other Los Angeles station, network, or
independent. The station credits its "significant penetration by way of
CATV stations."
WGN, an independent station in Chicago claims substantial viewing
far beyond the reach of its signal by virtue of CATV systems.
The rate card of KSL, a network affiliate in Salt Lake City, shows
coverage by KSL of "Mountain America" — even extending, thanks
to rable television, as far as northern Wyoming.
The list could go on and on. But rather than belabor the point, I will
simply submit these brochures themselves to the committee.
Wliat do these extra viewers that cable adds to the audience of these
stations mean to the relationship between station and advertiser?
It means that the station time is more valuable and so the advertiser
pays more. Now listen to what Miss Da Costa, who is in charge of all
media-related research at Ted Bates, the Nation's fifth largest ad-
vertising agency, says :
Viewing ocf^iirrins: on CATV systems has been inchided in surveys for quite
some time in the total audience reported for individual stations. The industry
has generally used these total audience figures to establish rates and corre-
sponding cost efficiencies. This practice compensates stations for all viewing
including that which takes place within CATV houses — both inside and outside
the range of the station's off-air reception area.
To go back to our example, we see that the copyright owner whose
creation is broadcast bv the New York City station and imported, by
cable, to viewers in Oswego has not been deprived of the chance to
earn money by showing his production in Oswego. For the advertis-
ing revenues to be derived fn^m showing the program to the cable
subscribers in Oswego have already been derived by the New York
City station. And, as a result, the New York City station will pay
the copyright owner more than if the station were unable to reach
the Oswego audience.
57-786 O - 76 - pt. 1 - 44
670
To allow the copyright holder to be compensated again — this time
directly by the Oswego cable system — would be giving him the wind-
fall of an undeserved second payment. This is a windfall that neither
the cable television industry nor the 15 percent of the American house-
holds, which are cable television subscribers, can afford.
Thank you.
Mr. Kastenmeier. Thank you, Mr. Bresnan.
You make a consistent point that regular broadcasters benefit, as do
advertisers, and potent iall}' the copyright owner, by virtue of the addi-
tional audience that cable television provides. Do the broadcasters
agree to that, or do they dispute that fact ?
Mr. Bresnan. I will be submitting to you the brochures from the
broadcasters who claim all of these additional market areas. Those
two charts are the work of the Association of Independent Television
Broadcasters. Now, there may be times when they claim one thing
and at times another, but when they construct the rate chart, they
do claim these territories.
[The material referred to is in the files of the subcommittee.]
Mr. Kastenmeier. I am only asking for the purpose of ascertain-
ing whether that is a point in dispute, or whether the broadcasters
agree to that, that this includes your subscribers, in terms of their
sold audience.
Mr. Bresnan. I'm not sure I understand the question clearly. There
is no dispute that broadcasters claim coverage of the CATV sub-
scribers who are provided the signals by the CATV system.
I have been advised by ]\Iiss De Costa on my left
Mr. Kastenmeier. Yes, I thought perhaps Miss De Costa might
know more precisely, as a matter of technical expertise, whether that
is correct. It is a matter of fact rate cards are built on the basis of
cable audiences, as well as normal audiences. Do the broadcasters
dispute that?
Miss De Costa. No. As a matter of fact, they look towards this
audience to increase the size of their delivery.
Mr. Bresnan. Miss De Costa has advised me, Mr. Chairman that
to her knowledge every single cable television customer finds his way
into a broadcaster's rate base.
Mr. Kastenmeier. Does the Teleprompter Corp. have a number
of different types of systems? That is to say, does it have systems
which retransmit only, and other systems which originate, use micro-
waves predominantly? "Wliat sort of systems do you have?
Mr. Bresnan. Our company is a pretty good cross section of all
types of cable systems, from coast to coast, from large to very small.
We originate in some, and in others we do not. It is a good cross section
of the industry.
Mr. Kastenmeier. Were you a party to the consensus agreement,
or were you present at that time; or on the basis of litigation, did
you absent yourself ?
Mr. Bresnan. I am glad you asked that because that so-called con-
sensus agreement came up quite a bit today, and I do have some pretty
strong feelings about it.
The consensus agreement come about at a time shortly after the time
that the company I had been with merged into Tolei^rompter and Tele-
prompter's then management pretty much carried the ball. Although
I was on the NCTA board — I believe I was vice chairman — when that
came about.
671
I would like to state that the consensus agreement, in my opinion,
was really a legend. It was pushed down the throat of the cable tele-
vision industry, in my opinion, by the White House. If you like, I can
expand on that.
Mr. Kastenmeier. I'm sorry, did you say that you were present
at the time ?
Mr. Bresnan. I was present at the NCTA board meeting.
Mr. Kastenmeier. For a different corporation?
Mr. Bresnan. No; I was with Teleprompter. But Teleprompter's
position was being determined by the then Teleprompter management.
I had just joined the company shortly before then by virtue of the
merger of my company into Teleprompter.
Mr. Kastenmeier. And you said it was "shoved down the throat"
of the cable people. How about the other parties, might they also
have been somewhat unwilling, or unenthusiastic about the com-
promises they received ?
Mr. Bresnan. I doubt that they had too little to be unenthusiastic
about, sir. At the time that that happened, the cable television industry
had been frozen for about 5i/^ to 6 years. And we were in a very deep
freeze for about 3 years, from 1968 through 19Y1.
During the summer of 1971 the FCC studied proposed new rules
which would lift the freeze on cable television, and things started to
look pretty good for cable television after a long dry spell.
And in August of 1971 the then Chairman of the FCC sent a letter
of intent to Congress, explaining the rules that the Commission pro-
posed to adopt. Shortly thereafter, representatives of the broadcasting,
copyright, and cable television industries were invited to a White
House meeting. The net result of that meeting was that the cable tele-
vision industry balked at these changes. They were told in no uncertain
terms by Peter Flanigan that if they didn't agree to this thing they
would get nothing, the White House would see to that.
That story was delivered back to the National Cable Television
Association board of directors. Some of the directors voted for it
reluctantly, some voted against it; but it was a pretty sad day for
cable TV.
Mr. Kastenmeier. Do I understand the context that was used, "you
would get nothing," not only to potential copyright legislation that
the administration might take a position on, but particularly the FCC
rules then pending ?
Mr. Bresnan. Specifically it had to do with the FCC rules. The
FCC had in a letter of intent stated that it believed it should handle
the regulatory aspects of cable TV, and leave up to the Congress the
handling of the copyright aspects.
Mr. Kastenmeier. Then I assume, if I follow this correctly — and
I assure you, I do not know precisely what transpired — that as a
result of your fellow cable operators coming to an agreement, the
Commission subsequently issued rules recognizing that compromise.
In other words, reading between the lines of what you have said,
the consensus agreement did produce some concessions for the cable
industry, as well as the others, as a result of your coming to that agree-
ment in terms of the consensus agreement ; or at least others.
Mr. Bresnan. Well, first of all
Mr. Kastenmeier. In other words, was there not a quid pro quo
which the'consensus agreement reflects ?
672
Well, this committee is not party to such a bargain, but I suppose
we miglit take note of it.
Mr. Bresnan. The rules that we were hoping to get out of the FCC
we did not get. And I recall such powerful words — I think they were
attributed to Peter Flanigan — "There will be a blood bath for cable
television."
Mr. Kastenmeier. Well, that has not happened either, has it?
Mr. Bresnan. We seem to have gotten everything.
Mr. Kastenmeier. The Chair yields to the gentleman from Illinois,
Mr. Railsback.
Mr. Kailsback. The blood bath was earlier, wasn't it? [Laughter.]
Do you think we could have a copy of your annual report that is
referred to in your earlier testimony, would that be possible ?
Mr. Bresnan. Yes, sir.
[The material referred to is in the files of the subcommittee.]
Mr. Railsback. Do you recall the reason for what appears to be an
extraordinary loss to your company in 1973 ?
Mr. Bresnan. Yes. Teleprompter Corp. was expanding into several
of the top markets. Teleprompter, I guess, was probably attempting
to do more to prosecute the intention of the FCC rules than any other
company. It was not getting subscribers as fast as it was building
plant. It stopped construction in a number of systems, and slowed
down construction in others. It changed its whole mode of operations,
if you will, from that of a construction company to that of an operat-
ing company.
There were significant operating costs and losses, and there was
some write down of assets due to this change.
Mr. Railsback. So, it really was, or could be characterized as an
extraordinary loss, or a nonrecurring loss.
Mr. Bresnan. Well, of part of it you could say that. However, in
1974 the industry also had a loss.
Mr. Railsback. You went from $29 million down to about $7 mil-
lion?
Mr, Bresnan. Yes. And the interesting thing, Mr. Railsback, we
picked up a bit of information this morning from a very well-respected
cable analyst, and he t«lls us that of the 15 publicly held companies
which represent 4.2 million of the 10 million cable subscribers; that
those systems combined showed a net loss in 1974 of $31 million.
Now, we don't know how much profit or loss privately held com-
panies would have because we don't have access to that information.
But we estimate that the entire industry last year did not operate
at a profit.
Mr. Railsback. Let me just mention, the exhibit attached to your
testimonv reflects that the nine largest public CATV companies, there
was a 1974 loss of $16.3 million; but 17.2 percent of that total figure
was Telecommunications; and in the year 1973 there was a loss, a net
income loss of $27.9. There is a figure that you had that year, and this
is part of the total figure, that your company had a 29.7. Two com-
panies have a rather severe impact on the total figure in both years,
your Telecommunications and Teleprompter.
Mr. Bresnan. No question about that, sir. However, the fact re-
mains that in 1974, at which time Teleprompter did not have a real
large loss, as we had in 1973, the top 15 publicly held companies I re-
ferred to just a moment ago, had a net result of a $81 million loss.
673
Mr. Railsback. Which year was that ?
Mr. Bresnan. 1974.
Mr. Railsback. Well, in 1974 Telecommunications had contributed
toward that 17.2 percent of the 15 companies.
Mr. Bresnan. Yes.
Mr. Railsback. I think that is all I have.
Mr. Kastenmeier. The gentleman from California, Mr. Danielson.
Mr. Danielson. Thank you, Mr. Chairman.
After this consent agreement which I think we all have heard a lot
about recently, do you know whether the cable industry had any part
in drafting it, preparing it? That is the Consensus Agreement.
Mr. Bresnan. I don't know, sir.
Mr. Danielson. You are not saying that the cable industry did not
participate in the preparation, you are saying you don't know whether
they did.
Mr. Bresnan. I am saying I don't know.
Mr. Danielson. Do you know of anybody who does know ?
Mr. Bresnan. We believe it was drafted by OTP. There were meet-
ings conducted, where the participants included representatives of
the NCTA and the broadcasting industry, and I believe the copyright
industry. I don't know whether they were actual drafting sessions. We
could find out.
Mr. Danielson. But your opinion is that, at least subsequent to
those meetings, the agreement was drafted by, in your opinion, OTP.
Mr. Bresnan. Yes, sir.
Mr. Danielson. Which is Office of Telecommunications policy, I
believe.
Mr. Bresnan. That's correct.
Mr. Danielson. Were you present at the meeting where you were
told, you get this, or you get nothing ?
Mr. Bresnan. The meeting with Mr. Flanigan ?
Mr. Danielson. Well, you referred to a meeting
Mr. Bresnan. I was present at a meeting of the NCTA board, where
the remarks of the meeting with Mr. Flanigan were reported to the
board.
Mr. Danielson. In other words, someone reported to you thni hnd
been said.
Mr. Bresnan. That is correct.
Mr. Danielson. Who reported that to you ?
Mr. Bresnan. The person I remember specifically who gave quite a
bit of reporting at that time was Gary Christensen, who at that time
was general counsel to NCTA.
Mr. Danielson. And he made that report to a group of National
Cable Television Association people, which included yourself ; is that
correct ?
Mr. Bresnan. That is correct.
Mr. Danielson. Do you know whether there were any changes made
in the so-called consensus agreement after that time, before it was
signed ?
Mr. Bresnan. T can't recall, sir.
Mr. Danielson. You recall no changes, but you do not recall that
there were no changes, also ; is that correct ?
Mr. Bresnan. That is correct.
674
Mr. Danielson. You do not recall any changes, but you also do not
know if there were no changes.
Mr. Bresnan. That is correct.
Mr. Danielson. Were you an officer of Teleprompter at the time the
agreement was signed ?
Mr. Bresnan. Yes, I was.
Mr. Danielson. Were you at a policymaking level at Teleprompter
at that time ?
Mr. Bresnan. No, sir.
Mr. Danielson. Do you have any knowledge as to whether or not
Teleprompter would have agreed to the so-called consent agreement,
but for the threat that you reported, that you would get this, or you
would get nothing ?
Mr. Bresnan. To my knowledge neither Teleprompter nor anyone
else at NCTA would have accepted that agreement, were it not for the
threat ; that was the feeling I got.
Mr. Danielson. Were you at the meeting of the NCTA people when
it was reported ?
Mr. Bresnan. Yes, I was.
Mr. Danielson. And can you tell me whether your feeling, which I
am going to describe as a negative feeling for point of reference ; can
you tell me whether that was shared, as far as you can tell, by others?
Mr. Bresnan. As far as I can tell, sir, it was. It was a very, very
gloomy meeting at which we were told we would have to accept some-
thing which we all knew was bad for our industry.
Mr. Danielson. Directing your attention, now, to the two charts on
the side wall which your colleague pointed out a while ago, I note that
the upper one depicts what I am going to call New England, Pennsyl-
vania, New Jersey, New York, and up through to Maine. Portions of
the map are in a dark gray, and portions in white.
It is my understanding that in the white area, the area that is cir-
cumscribed by a heavy dark, black line, is the primary viewing area
of the New York City television broadcasting stations ; am I right on
that?
Mr. Bresnan. Yes, sir.
Mr. Danielson. And beyond that heavy line there continue to be, in
irregular formation, other white areas, reaching from upper New York
back all the way, I guess, to the St. Lawrence River to Canada ; down
through New York, one leg going out to a lake — I can't name it.
Mr. Pattison. Atlantic. [Laughter.]
Mr. Danielson. Another leg going down to the Pennsylvania south-
ern end, again western boundary. Do I understand your testimony to
be that those white areas are included within the potential viefwing
audience of the New York City television stations, in conjunction with
their advertising rate schedule. Am I right, or wrong on that ?
Mr. Bresnan. You are right.
Mr. Danielson. I would like to ask a question, and I think it's really
for Miss Da Costa. I understand Miss Da Costa is a professional ad-
vertising agency person ; am I correct ?
Miss Da Costa. Yes, sir.
Mr. Danielson. How long have you been so employed ?
Miss Da Costa. More than I care to admit, about 30 years.
Mr. Danielson. Well, you started as a child, then. [Laughter.]
675
Miss Da Costa. Thank you.
Mr. Danielson. Aiiyway, does your work include the contracting
for advertising through television stations by the clients of your
advertising agency?
Miss Da Costa. Not directly, sir. I advise our buyers and planners
of all media available to them to buy. I am not directly involved
in buying.
Mr. Daneelson. But that includes advice as to television audiences ?
Miss Da Costa. Yes, that is my area of expertise, I am charged
with media research at Ted Bates.
Mr. Danielson. The Ted Bates Co., I'm pretty ignorant in that
field; are they a pretty well-established firm?
Miss Da Costa. Yes, they are the fifth largest agency in the country.
Mr. Danielson. Do they handle major clients, major industries,
businesses ?
Miss Da Costa. Yes, sir, many of them.
Mr. Danielson. Not Joe's Used Car Lot.
Miss Da Costa. All of our clients are national accounts.
Mr. Danielson. I like Joe's Used Car Lot [Laughter.]
You have expertise in big ones.
Miss Da Costa. All of our accounts are national accounts.
Mr. Danielson. Then, the statement which I made — T wasn't too
sure if I understand you correctly. Do you know of your own per-
sonal knowledge that in computing the advertising rates which are
charged to these national accounts by the TV stations for their adver-
tising, is the audience encompassed in these white areas in the charts
included ?
Miss Da Costa. Yes, sir.
Mr. Danielson. I don't suppose you handle the California accounts.
Miss Da Costa. No, sir.
Mr. Danielson. There is a similar chart there, maybe the witness
can explain. 'Where did you obtain these charts, what is the source
of the charts?
Mr. Bresnan. The Association of Independent Television Stations.
Mr. Danielson. And can you tell me what that is?
Mr. Bresnan. A group of broadcasting companies that are not affili-
ated with network companies.
Mr. Danielson. And someone has simply copied these maps from
their information.
Mv. Bresnan. We have brochures that this Association of Broad-
casters has put out.
Mr. Danielson. And they are blowups, are they?
Mr. Simon. Exactly.
Mr. Danielson. I'm not going to ask you whether you copied them,
you might have a copyright problem. [Laughter.]
Anyway, that's really what they represent.
Mr. Bresnan. Yes, sir.
Mr. Danielson. I see that California and the Southwest are in-
cluded; and do the same analogies of white areas and gray areas
prevail there, as in New York?
Mr. Bresnan. Yes. As a matter of fact, I would like to make one
further point. Mr. Simon, would you find that line?
676
Mr. Simon. Here is the dark line, the primary viewing line again.
Mr. Danlelson. And this is from San Francisco.
Mr. Simon. That's correct, San Francisco stations.
Mr. Bresnan. The white area goes all the way up to Oregon, and
east into Nevada.
Miss Da Costa advises me that, not only do the broadcasters from
San Francisco claim this coverage — and therefore ultimately moneys
filter back to the copyright area- — but she says also, that the syndi-
cators will at the same time be selling programs in the Sacramento,
Reno and Redding markets, also ; they are selling them again to those
markets. And what they are proposing to do now in the case of CATV,
is to sell them a third time in many cases.
Mr. Danlelson. Now lastly, it's my understanding that the owner
of a copyrightable item, let's say the film of Bambi, may sell the
right to use it to, say, a Boston TV station for their regular broad-
cast.
Suppose that the same film has been sold by the copyright owner,
leased, licensed, what have you, to a TV station in the city of New
York for its use. And through cables they picked it up and dissemi-
nated the program ^\^thin the city of Boston, let's say, a month in
advance of the showing in the city of New York,
Does not this diminish the value of the Boston licensee in using
the film?
Mr. Bresnan. Sir, if the copyright owner — the owner of the prod-
uct— didn't recognize when selling that product, in this case, the
Bambi film to the New York station, didn't recognize that that signal
would go up into the Boston area, he is a fool because the coverage
area of these stations, as you will see when you examine the brochures
that I am going to leave with you, is clearly depicted. This is no secret.
It's no surprise — it shouldn't be a surprise because it's stated in the
advertising literature how far out that station's signal goes because
of CATV.
Mr. Danlelson. OK. Are you, sir, or any of you in your group able
to tell me, or do you have any expertise, how are the negotiations
carried on between a copyright owner — the owner of Bambi, for
example — and the station ?
I don't know anything about that. Do you advertising people do
that kind of work ?
Miss Da Costa. Well, generally the syndicator is the one that sells
programming to individual stations within markets. They negotiate
and take that into account, the number of homes that are delivered
to that particular station and that particular market.
Mr. Danielson. I think we have a word of art here. You said "syndi-
cators," are they the people who sell the films, and so forth
Miss Da Costa. Yes, sir.
Mr. Danlelson [continuing]. To broadcasting stations?
Miss Da Costa. There is some company that does that, although
there are some originating producers that do their own selling.
Mr. Danielson. But in that connection, the sale includes whatever
is the copyright royalty, that is in the package.
Miss Da Costa. That is a total package, yes.
Mr. Danlelson. Now, some of the Teleprompter stations originate
their own programs, I am sure I heard you say that.
677
Mr. Bresnan. Yes, sir.
Mr. Danielson. Now, in those instances you do pay royalties, do you,
for the copyrighted materials that you use ?
Mr. Bresnan. Yes, and we agree with the principle of that.
Mr. Danielson. Now, do you negotiate with the copyright owner,
or with one of those syndicators ?
Mr. Bresnan. We buy the program generally from a distributor of
the program.
Mr. Danielson. Can you tell me if the word "distributor" as you
use it is similar to "syndicator" ?
Mr. Bresnan. Yes.
Mr. Danielson. Thank you, that's all the questions I have.
Mr. Kastenmeier. The gentleman from California, Mr. Wiggins.
Mr. Wiggins. If I understand you correctly, when you are selling
time to a large market, you can extract from an advertiser a greater
fee because of his access to that market.
Do you have any data showing that the copyright owner shares in
that?
Mr. Bresnan. The copyright owner negotiates with the broadcaster
for the fee which he will receive for the carriage of his program. The
copyright owner has available to him the advertising brochures of
the station, showing the coverage area.
I have no reason to believe that the copyright owner wouldn't
take advantage of such material in his negotiations. I have never
sat in on those negotiations, I'm not sure what goes on there.
Mr. Wiggins. Does anybody at the table have personal experience
in this ?
Miss Da Costa. I don't think that anyone can really determine what
portion of the rate they are charging, if it's just a copyright, or just
the time, or the use of the program. I think the syndicator establishes
the rate that will include some copyright fees. And also, in negotiating
with the station he will hopefully get what he feels the program is
AYorth.
Mr. Wiggins. But at least you are representing to us as a fact that the
negotiated fee is based upon the the total market to be served.
Miss Da Costa. That is taken into consideration, yes, sir.
Mr. Wiggins. Now, you have experience. Miss Da Costa, with na-
tional and regional accoimts. I gather your agency does not handle
local advertisers.
]VIiss Da Costa. We have one that we call a local advertiser, the
Chase Manhattan Bank.
[Laughter.]
Mr. Wiggins. Well, I was thinking more about Joe's Used Car Lot.
[Laughter.]
Mr. Wiggins. It seems to me that local independents are constantly
barraged by auto dealers selling their cars — I don't understand that a
local used car lot is really appealing to those large market areas. My
feeling is that such a local car dealer would be unwilling to pay for
that kind of expanded coverage because it's beyond his normal service
area.
If that is the case, isn't it likely that commercial operators similarly
situated would be denied the market of their own, and would not be
678
inclined to go to the owner of a copyrighted work and buy something
that is shown in one of these isolated areas?
Wliat I am tiying to project to you very inartfuUy is that it seems
to me there is a difference betweeen local advertising and regional and
national advertising, and that to the extent that national advertisers
blanket an area, they deny to a copyright owner the opportunity to sell
his work to a local advertiser. Have I made that point clear ?
Mr. Railsback. Will the gentlemen yield ?
Mr. Wiggins. Yes.
Mr. Railsback. Oak Park Savings and Loan carry ball games and
they come into my area, and they come in with local advertising, or
Koons.
Miss Da Costa. I'm not familiar with those.
Mr. Railsback. His point is — if the gentleman will yield further —
you may not always have a regional advertiser.
Miss Da Costa. Let me just explain to you how that works, starting
with the national advertiser. A national advertiser presumably has na-
tional distribution, and his product can be bought across the country.
Therefore, any advertising that he buys in one market, or an accumu-
lation of markets, his advertising is worth putting it on that station
because his product is everywhere.
A regional advertiser has a similar situation within the region area
that they have product distribution.
As far as the local, the truly local advertising that you are describ-
ing, sir, that advertiser feels, when he is investing money on a tele-
vision station within his market that the medium is strong enough to
get him customers, even though he pays a 10-percent premium for
those homes that are not potentials for him.
Mr. Wiggins. Well, perhaps that's so. Your illustration mentioned
New York City and Oswego, I believe. I would think there is a pos-
sibility at least that a used car dealership in Oswego, which might
otherwise be in the market to buy a movie, is not going to do so because
that movie is being transmitted to New York City. And that to an ex-
tent it is true that a copyright owner is deprived of an opportunity
to sell his product in Oswego.
Miss Da Costa. But if we examine hard research data that is avail-
able to us by county, where we can see the signals and stations that
are being viewed by the homes in the county, we see that 10 percent
of a county's homes views signals that are imported from as far away
as New York. And consequently the potential for that local car dis-
tributor is 90 percent of the market.
Mr. Wiggins. Well, I would like to be exposed to this hard data on
which you base your conclusion, I realize the conclusion is stated in the
testimony, but suppose that you worked out the figures in support of
this and, if you have them, would make them available to the committee.
Mr. Chairman, I would appreciate it.
Miss Da Costa. Sir, I did prepare a selected list of counties in which
I looked at the actual viewing as it is reported by the Nielsen Co.,
which is a recognized research organization. This is the kind of infor-
mation, if you will allow me to just mention it.
For example, in Oneida County, which is in the State of New York,
we found that 3.4 percent of the households viewed the WNEW TV
station in the course of a whole week.
679
Mr. Kastenmeier. The chairman will interrupt to announce this is
the second ring for a vote on the House floor.
Mr. Danielson, Are we coming back ?
Mr. Kastenmeier. No, we are not coming back.
Mr. Danielson. Mr. ChaiiTnan, may I suggest that the pamphlets
the witnesses placed on the table — they don't belong in our record —
but may we receive them for our files, for the record ?
Mr. Kastenmeier. Yes. Any materials that the witnesses have made
available.
The gentleman from New York, Mr. Pattison ?
Mr. Pattison. Well, I had some, but we are not going to have time.
Mr. Kastenmeier. On behalf of the committee, we thank you, Mr.
Bresnan, Miss Da Costa, and your associates, for appearing here today.
The Chair will announce that tomorrow at 9 :30 the subcommittee
will convene, first to hear briefly the news archives issue with two wit-
nesses ; and then, at 10 o'clock witnesses generally supporting section
111, more particularly from the broadcasting industry.
Until that time, the subcommittee will stand adjourned.
[The prepared statement of William J. Bresnan follows :]
Statement of William J. Bresnan, Senior Vice President and President,
Cable Division, Teleprompter Corp.
Good afternoon, I am William J. Bresnan, Senior Vice President of Tele-
prompter Corp., and President of our Cable Division. Teleprompter is the nation's
largest cable television company, having approximately twice as many cable
television subscribers as the second largest company.
On my right is Jay Ricks, a partner in the firm of Hogan & Hartson. On my
left is Jacqueline Da Costa, Director of Media Information and Analysis at Ted
Bates & Co., and to her left is Barry P. Simon, Teleprompter's Vice President and
General Counsel.
Teleprompter's position on copyright is straightforward. We believe cable
television systems should not be required to pay ANY copyright fee for tlie car-
riage of broadcast signals.
To understand this position, it is necessary to understand a basic fact about the
broadcast industry^a fact which makes that industry unique among all other
distributors of copyrighted materials. The broadcaster, unlike the movie pro-
ducer or the book publisher, does not sell a copyrighted product. What the broad-
caster sells is the attention of the viewers. The purchaser is the advertiser. The
more viewers the broadcaster can deliver to the advertiser, the more the adver-
tiser will pay. And the more the advertiser pays, the more money is available
for the broadcaster to pay the copyright owner.
Cable television affects this relationship only by enlarging the audience avail-
able to the broadcaster. In many cases this actually increases the advertising
revenues available to pay the copvright owner. In no case does it deprive the
copyright owner of anything to which he is entitled.
This is easily demonstrated by two examples.
First, imagine a television station located in a community, part of which is in
a valley where television reception is poor. Imagine also that a cable television
system offers its service to the people of this community. The people who live in
the valley have three choices: (1) they can install a tall rooftop antenna to
watch the programs broadcast by the television station, (2) they can subscribe
to the cable television system and thereby get the benefit of the antenna tower
erected by the cable television system or (3) they can do neither and simply not
watch the TV station's programs. As the Supreme Court has twice recognized,
choices 1 and 2 are functionally identical. Since no copyright liability attaches
when the viewer erects his own antenna, why should there be any liability
when the viewer avails himself of the antenna tower erected by the cable televi-
sion station? It is no answer to say that the cable television system makes (or
at least tries to make) a profit out of providing its service for clearly the antenna
manufacturer (like the television set manufacturer and numerous other third
parties in television related businesses) also seeks to make a profit.
680
Before going on to the second example, let's pause for a moment to consider
alternative (3) — where the prospective viewer neither buys the tall antenna nor
subscribes to the cable service but simply doesn't watch the programs broadcast
by our hypothetical television station. If this happens, what is the result? The
station has a smaller audience and therefore its advertising spots are less at-
tractive to potential advertisers. So the station gets less money. And this meana
there is less money available to the station to pay the copyright owner. From
this we can see that cable television, far from stealing from the copyright
owner, by increasing the size of the broadcaster's audience actually increases the
monies paid to the copyright owner.
Now consider a second situation. In this case imagine a television station in New
York City whose programs are imported — via microwave hops — by a cable system
and retransmitted over the cable to the cable television system's subscribers in
Oswego, New York who otherwise would not be able to view the New York City
station.
Is this situation really any different from our first example? Is the copyright
owner somehow damaged by the action of the cable station? Is he, perhaps, de-
prived of the ability to exploit his creation in Oswego after it has been seen there
on the cable ?
The answer to all these questions is, no. Because of the nature of broadcast eco-
nomics, the copyright owner cannot be injured by the cable system's importing
the New York City station into Oswego. And this is true even without considera-
tion of the complicated FCC exclusivity rules which seek to give added protec-
tion to the copyright owner and which may require the cable system to delete
programming so as to allegedly protect the copyright owner's markets.
As in the first example, by showing the imported programs in Oswego the cable
system increases the audience of the New York City station. And this is not
just a theoretical increase. The rating services — Nielsen and ARB — spend large
sums of money to keep track of cable subscribers with the result that every
single cable subscriber is accounted for in their surveys and so finds his way
into some television station's rate base. Thus, by simply checking in Nielsen we
find for example, that
In San Luis Obispo County, California, 30% of the television homes
view the Los Angeles independent and network stations on a regular basis,
In Grant County, New Mexico, 51% of the television homes view the
El Paso network stations on a regular basis,
In Chemung County, New York, 19.5% of the television homes view the
New York City independent stations on a regular basis.
In Lane County, Oregon, 20% of the television homes view the Portland
independent and network stations on a regular basis, and
In Sweetwater County, Wyoming, 81% of the television homes view the
Salt Lake City network stations on a regular basis.
In these cases, and in countless others, such coverage would be impossible
without cable television.
This fact has not been lost on the broadcasters. For example, the literature
put out by the Association of Independent Television Stations, in text accom-
panying these illustrations in which the white areas show the reach of inde-
pendent stations as enhanced by cable television, states
"The accompanying illustrations show how cable television can dramatically
increase the physical coverage area of independent stations . . . expanding their
infiuence far beyond the perimeters of the local television market. . . .
"Advertisers on cable-connected independent stations share in this expanded
TV coverage . . . reaching a bonus audience of consumers as valuable to the
national/regional advertiser as those situated vsdthin the defined local market
area."
As a further illustration of this point, I have here a stack of promotional
brochures put out by television stations. Each one takes pains to point out that
its audience includes cable subscribers in distant markets. So we find that,
KTLA, an independent station in Los Angeles, claims a greater potential
audience than any other Los Angeles station, network or independent. The
station cretlits its "significant penetration by way of CATV stations."
WGN, an independent station in Chicago, claims substantial viewing far
beyond the reach of its signal by virtue of cable systems.
The rate card of KSL, a network aflBliate in Salt Lake City, shows coverage
by KSL of "Mountain America" — even extending, thanks to cable television,
as far as northern Wyoming.
681
The list could go on and on. But rather than belabor the point, I'll simply
submit these brochures themselves to the Committee.
What do the extra viewers that cable adds to the audience of these stations
mean to the relationship between station and advertiser? It means that the
station time is more valuable and so the advertiser pays more. Listen to what
Miss Da Costa, who is in charge of all media related research at Ted Bates,
the nation's fifth largest advertising agency, says :
"Viewing occurring on CATV systems has been included in surveys for quite
some time in the total audience reported for individual stations. The industry
has generally used these total audience figures to establish rates and correspond-
ing cost efficiencies. This practice compensates stations for all viewing including
that which takes place within CATV homes (both inside and outside the range
of the station's ofif-air reception)."
To go back to our example, we see that the copyright owner whose creation
is broadcast by the New York City station and imported, by cable, to viewers in
Oswego, has not been deprived of the chance to earn money by showing his
production in Oswego. For the advertising revenues to be derived from showing
the program to the cable subscribers in Oswego have already been derived by
the New York City station. And, as a result, the New York City station will pay
the copyright owner more than if the station were unable to reach the Oswego
audience.
To allow the copyright holder to be compensated again — this time directly
by the Oswego cable system — would be giving him the windfall of an undeserved
second payment. This is a windfall that neither the cable television industry nor
the 15% of the American households which are cable television subscribers can
afford.
Thank you.
[Whereupon, at 2:55 p.m., the subcommittee adjourned, to recon-
vene at 9 :30 a.m., Thursday, June 12, 1975.]
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